UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-12471
THEMAVEN, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 68-0232575 | |
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) | |
225 Liberty Street, 27th Floor New York, New York |
10281 | |
| (Address of principal executive offices) | (Zip Code) |
(212) 321-5002
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.01 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [X] | Smaller reporting company [X] |
| Emerging growth company [ ] |
If emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(b) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] or No [X]
As of June 30, 2020, which was the last business day of the registrant’s most recently completed second fiscal quarter for fiscal 2020, the aggregate market value of the common stock held by non-affiliates was $16,160,565. This calculation is based upon the closing price of the common stock of $0.65 per share on that date, as reported by the OTC Markets Group Inc.
As of August 13, 2021, the Registrant had 263,441,879 shares of common stock outstanding.
Form 10-K
Table of Contents
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EXPLANATORY NOTE
TheMaven, Inc. (“Maven,” the “Company,” “us,” “we,” or “our”), is filing this Annual Report on Form 10-K (this “Annual Report”) for the fiscal year ended December 31, 2020 (the “Fiscal Year Period”) as part of its efforts to become current in its filing obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Included in this Annual Report are the Company’s audited financial statements and related financial information for the Fiscal Year Period, which have not previously been filed with the Securities and Exchange Commission (the “SEC”).
We intend to file Quarterly Reports on Form 10-Q for the first and second quarters of fiscal 2021 as soon as reasonably practicable. Following the filing of the Quarterly Report on Form 10-Q for the second quarter of fiscal 2021, we will be current in our filing obligations.
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Cautionary Statement Regarding Forward-Looking Information
Certain statements and information in this Annual Report may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Forward-looking statements relate to future events or future performance and include, without limitation, statements concerning our business strategy, future revenues, market growth, capital requirements, product introductions, and expansion plans and the adequacy of our funding. Other statements contained in this Annual Report that are not historical facts are also forward-looking statements. We have tried, wherever possible, to identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and other comparable terminology.
We caution investors that any forward-looking statements presented in this Annual Report, or that we may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and information currently available to, us. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based only on known results and trends at the time they are made, to anticipate future results or trends. Certain risks are discussed in this Annual Report and also from time to time in our other filings with the SEC.
This Annual Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Annual Report.
This Annual Report is being filed for the fiscal year ended December 31, 2020, as a late report to comply with the reporting obligations applicable to us under the Exchange Act. Unless specifically required to provide information for the fiscal year ended December 31, 2020, by the rules and regulations of the SEC, the discussion of the business of the Company reflects its current assets and current operations. Where the information relates to the fiscal year ended December 31, 2020, we have made a reasonable effort herein to make that clear. Also, to be clear, the financial information in the consolidated financial statements and footnotes accompanying this Annual Report and the other financial information and management’s discussion about the consolidated financial statements relate to the periods for the years ended December 31, 2020 and 2019.
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We operate a best-in-class technology platform empowering premium publishers who impact, inform, educate and entertain. We operate a significant portion of the media businesses for Sports Illustrated (as defined below), own and operate TheStreet, Inc. (the “TheStreet”), and power more than 250 independent brands. The Maven technology platform (the “Maven Platform”) provides digital publishing, distribution, and monetization capabilities for the Sports Illustrated and TheStreet businesses as well as a coalition of independent, professionally managed, online media publishers (each a “Publisher Partner”). Each Publisher Partner joins the media-coalition by invitation-only and is drawn from premium media brands and independent publishing businesses. Publisher Partners publish content and oversee an online community for their respective sites, leveraging our proprietary technology platform to engage the collective audiences within a single network. Generally, Publisher Partners are independently owned, strategic partners who receive a share of revenue from the interaction with their content. When they join, we believe Publisher Partners will benefit from the proprietary technology of the Maven Platform, techniques and relationships. Advertising revenue may improve due to the scale we have achieved by combining all Publisher Partners onto a single platform and a large and experienced sales organization. They may also benefit from our membership marketing and management systems, which we believe will enhance their revenue. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management.
Please see “Our Future Business” and “Future Liquidity” for additional important information in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Corporate History
We were originally incorporated in Delaware as Integrated Surgical Systems, Inc. (“Integrated”) in 1990. On July 22, 2016, Amplify Media, Inc. was incorporated in Delaware and on July 27, 2016, it changed its name to Amplify Media Network, Inc. (“Amplify Media Network”). Amplify Media Network changed its name again on October 14, 2016 to TheMaven Network, Inc. (“Maven Network”).
On October 11, 2016, Integrated and Maven Network entered into a share exchange agreement (the “Share Exchange Agreement”), whereby the stockholders of Maven Network agreed to exchange all of the then-issued and outstanding shares of common stock for shares of common stock of Integrated. On November 4, 2016, the parties consummated a recapitalization pursuant to the Share Exchange Agreement and, as a result, Maven Network became a wholly owned subsidiary of Integrated. Integrated changed its name to TheMaven, Inc. on December 2, 2016. On March 5, 2018, TheMaven Network changed its name to Maven Coalition, Inc. (“Maven Coalition 1”).
HubPages Merger
HubPages, Inc., a Delaware corporation (“HubPages”), became our wholly-owned subsidiary pursuant to that certain agreement and plan of merger, dated March 13, 2018 (“Agreement and Plan of Merger”), and as amended by the Amendment to Agreement and Plan of Merger, dated April 25, 2018 (“First Amendment”), the Second Amendment to Agreement and Plan of Merger, dated June 1, 2018 (“Second Amendment”), the Third Amendment to Agreement and Plan of Merger, dated May 31, 2019 (“Third Amendment”), and the Fourth Amendment to Agreement and Plan of Merger, dated December 15, 2020 (the “Fourth Amendment” and, collectively with the Agreement and Plan of Merger, the First Amendment, the Second Amendment, and the Third Amendment, the “HubPages Merger Agreement”) between us, HubPages, and HP Acquisition Co, Inc. (“HPAC”), a wholly-owned subsidiary of ours incorporated in Delaware on March 13, 2018 in order to facilitate the acquisition of HubPages by us. Pursuant to the HubPages Merger Agreement, HPAC merged with and into HubPages, with HubPages continuing as the surviving corporation in the merger and as a wholly-owned subsidiary of ours (the “HubPages Merger”). On August 23, 2018, we acquired all the outstanding shares of HubPages pursuant to the HubPages Merger.
Say Media Merger
Say Media, Inc., a Delaware corporation (“Say Media”), became our wholly owned subsidiary pursuant to that certain agreement and plan of merger, dated October 12, 2018 and as amended on October 17, 2018 (collectively, the “Say Media Merger Agreements”) between us, Say Media, SM Acquisition Co., Inc., a Delaware corporation (“SMAC”), which is a wholly owned subsidiary of ours incorporated on September 6, 2018 to facilitate a merger, and Matt Sanchez, solely in his capacity as a representative of the Say Media security holders. Pursuant to the Say Media Merger Agreement, SMAC merged with and into Say Media, with Say Media continuing as the surviving corporation in the merger as a wholly owned subsidiary of ours (the “Say Media Merger”). On December 12, 2018, we acquired all the outstanding shares of Say Media pursuant to the Say Media Merger Agreements.
Acquisition of TheStreet, Inc. and Relationship with Cramer Digital
TheStreet became our wholly-owned subsidiary pursuant to that certain agreement and plan of merger, dated June 11, 2019, as amended (the “TheStreet Merger Agreement”), between us, Say Media, and TST Acquisition Co., Inc., a Delaware corporation (“TSTAC”), a newly-formed indirect wholly-owned subsidiary of ours formed in order to facilitate the acquisition of TheStreet by us. Pursuant to TheStreet Merger Agreement, TSTAC merged with and into TheStreet, with TheStreet continuing as the surviving corporation in the merger as a wholly-owned subsidiary of ours (the “TheStreet Merger”). On August 7, 2019, we acquired all the outstanding shares of TheStreet pursuant to the TheStreet Merger.
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On August 7, 2019, in connection with the TheStreet Merger, we entered into a letter agreement (the “Original Cramer Agreement”) with finance and stock market expert Jim Cramer, who co-founded TheStreet, which sets forth the terms of the Cramer Services to be provided by Mr. Cramer and Cramer Digital, Inc. (“Cramer Digital”), a production company owned and controlled by Mr. Cramer, featuring the digital rights and content created by Mr. Cramer and his team of financial experts. A second letter agreement providing additional terms was entered into on April 16, 2020 (the “Second Cramer Agreement”). We entered into a third letter agreement on January 25, 2021, which extended the notice date to cancel the third year of the term of the Original Cramer Agreement from February 7, 2021 to April 9, 2021 (the “Third Cramer Agreement” and, together with the Original Cramer Agreement and the Second Cramer Agreement, the “Cramer Agreement”). On April 6, 2021, Cramer Digital notified us that it would cancel the optional third year of the term of the Cramer Agreement and we and Cramer Digital commenced negotiation of a new contract. On August 7, 2021, we entered into an extension of the Cramer Agreement to provide Mr. Cramer's services through September 30, 2021. Further, we are in discussions about an ongoing relationship.
The Cramer Agreement provides for Mr. Cramer and Cramer Digital to create content for us on each business day during the term of the Cramer Agreement, prepare special content for us, make certain personal appearances and provide other services as reasonably requested and mutually agreed to (collectively, the “Cramer Services”). In consideration for the Cramer Services, we pay Cramer Digital a commission on subscription revenues and net advertising revenues for certain content (the “Revenue Share”). In addition, we pay Cramer Digital approximately $3,000,000 as an annualized guarantee payment in equal monthly draws, recoupable against the Revenue Share. We also issued two options to Cramer Digital pursuant to our 2019 Equity Incentive Plan (the “2019 Plan”). The first option was to purchase up to two million shares of our common stock at an exercise price of $0.72, the closing stock price on August 7, 2019, the grant date. This option vests over 36 months. The second option was to purchase up to three million shares of our common stock at an exercise price of $0.54, the closing stock price on April 21, 2020, the grant date. In the event Cramer Digital and we agree to renew the term of the Cramer Agreement for a minimum of three years from the end of the second year of the current term, 900,000 shares will vest on the first day of the third year of the term as so extended (the “Trigger Date”). The remaining shares will vest equally on the 12-month anniversary of the Trigger Date, the 24-month anniversary of the Trigger Date and the 36-month anniversary of the Trigger Date.
In addition, we provide Cramer Digital with a marketing budget, access to personnel and support services, and production facilities. Finally, the Cramer Agreement provides that we will reimburse fifty percent of the cost of the rented office space by Cramer Digital, up to a maximum of $4,250 per month.
The Sports Illustrated Licensing Agreement
On June 14, 2019, we entered into a licensing agreement (the “Initial Licensing Agreement”), as amended by Amendment No. 1 to Licensing Agreement, dated September 1, 2019 (the “SI First Amendment”), Amendment No. 2 to Licensing Agreement, dated April 1, 2020 (the “SI Second Amendment”), Amendment No. 3 to Licensing Agreement, dated July 28, 2020 (the “SI Third Amendment”), Amendment No. 4 to Licensing Agreement, dated June 4, 2021 (the “SI Fourth Amendment”), and Side Letter, dated as of June 4, 2021 (the “SI Side Letter” and, together with the Initial Licensing Agreement, SI First Amendment, the SI Second Amendment, the SI Third Amendment, and the SI Fourth Amendment, the “Sports Illustrated Licensing Agreement”) with ABG-SI LLC (“ABG”), a Delaware limited liability company and indirect wholly-owned subsidiary of Authentic Brands Group, pursuant to which we have the exclusive right and license in the United States, Canada, Mexico, United Kingdom, Republic of Ireland, Australia, and New Zealand to operate the Sports Illustrated (“Sports Illustrated”) media business (in the English and Spanish languages), including to (i) operate the digital and print editions of Sports Illustrated (including all special interest issues and the swimsuit issue) and Sports Illustrated for Kids, (ii) develop new digital media channels under the Sports Illustrated brands, and (iii) operate certain related businesses, including without limitation, special interest publications, video channels, bookazines, and the licensing and/or syndication of certain products and content under the Sports Illustrated brand (collectively, the “Sports Illustrated Licensed Brands”).
The initial term of the Sports Illustrated Licensing Agreement commenced on October 4, 2019 upon the termination of the Meredith License Agreement (as defined below) and continues through December 31, 2029. We have the option, subject to certain conditions, to renew the term of the Sports Illustrated Licensing Agreement for nine consecutive renewal terms of 10 years each (collectively with the initial term, the “Term”), for a total of 100 years. The Sports Illustrated Licensing Agreement provides that we will pay to ABG annual royalties in respect of each year of the Term based on gross revenues (“Royalties”) with guaranteed minimum annual amounts. On the execution of the Sports Illustrated Licensing Agreement, we prepaid ABG $45,000,000 against future Royalties. ABG will pay to us a share of revenues relating to certain Sports Illustrated business lines not licensed to us, such as all gambling-related advertising and monetization, events, and commerce. The two companies are partnering in building the brand worldwide.
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Pursuant to a publicly announced agreement, dated May 24, 2019, between ABG and Meredith Corporation (“Meredith”), an Iowa corporation, Meredith previously operated the Sports Illustrated Licensed Brands under license from ABG (the “Meredith License Agreement”). On October 3, 2019, we, and Meredith entered into a Transition Services Agreement and an Outsourcing Agreement (collectively, the “Transition Agreement”), whereby the parties agreed to the terms and conditions under which Meredith continued to operate certain aspects of the business, and provided certain services during the fourth quarter of 2019 as all activities were transitioned over to us. Through these agreements, we took over operating control of the Sports Illustrated Licensed Brands, and the Transition Agreement was terminated.
Merger of Subsidiaries
On December 19, 2019, our wholly owned subsidiaries, Maven Coalition 1 and HubPages, were merged into another of our wholly owned subsidiaries, Say Media. On January 6, 2020, Say Media changed its name to Maven Coalition, Inc. (the “Maven Coalition”).
Asset Acquisition of Petametrics Inc.
On March 9, 2020, we entered into an asset purchase agreement with Petametrics Inc., doing business as LiftIgniter, a Delaware corporation (“LiftIgniter”), and Maven Coalition, whereby Maven Coalition purchased substantially all the assets of LiftIgniter’s machine learning platform, which personalizes content and product recommendations in real-time. The purchased assets included LiftIgniter’s intellectual property and excluded certain accounts receivable. Maven Coalition also assumed certain of LiftIgniter’s liabilities. The purchase price consisted of: (i) a cash payment of $184,087 on February 19, 2020, in connection with the repayment of certain of its outstanding indebtedness; (ii) a cash payment at closing of $131,202; (iii) collections of certain accounts receivable; (iv) on the first anniversary date of the closing issuance of restricted stock units for an aggregate of up to 312,500 shares of our common stock; and (v) on the second anniversary date of the closing issuance of restricted stock units for an aggregate of up to 312,500 shares of our common stock.
Acquisition of College Spun Media Incorporation
On June 4, 2021, we entered into a Stock Purchase Agreement (the “CS Purchase Agreement”) with Maven Media Brands, LLC, our wholly owned subsidiary (“Maven Media”), College Spun Media Incorporated (“The Spun”), and it shareholders, (the “Seller Parties”), pursuant to which, Maven Media acquired all of the issued and outstanding shares of capital stock of The Spun (“The Spun Stock”).
Pursuant to the terms and subject to the conditions set forth in the CS Purchase Agreement, in exchange for The Spun Stock, Maven Media agreed to pay a purchase price, comprised of a cash payment of an aggregate of $11 million (the “Cash Payment”) and the issuance of an aggregate of 4,285,714 restricted shares of our common stock (the “Stock Payment”), with one-half of the shares vesting on the first anniversary of the closing date and the remaining one-half of the shares vesting on the second anniversary of the closing date. The Cash Payment will be paid as follows: (i) on the closing date, a cash payment of $10 million; (ii) on the first anniversary of the closing date, a cash payment of $500,000; and (iii) on the second anniversary of the closing date, a cash payment of $500,000. The Cash Payment is subject to a customary working capital adjustment based on cash and accounts receivable targets of The Spun as of the closing. Further, the vesting of the Stock Payment held by the Seller Parties is subject to the continued employment of certain senior executives of The Spun.
Corporate Offices
Our executive offices are located at 225 Liberty Street, 27th Floor, New York, New York 10281. At our California and Seattle locations, we carry out the software development and other operational activities. Our current telephone number is (775) 600-2765.
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Capital Restructuring
On October 11, 2016, Integrated and Maven Network entered into the Share Exchange Agreement that provided for each outstanding share of common stock of Maven Network to be converted into 4.13607 shares of our common stock (the “Exchange Ratio”), and for each outstanding warrant and stock option to purchase shares of common stock of Maven Network be cancelled in exchange for a warrant or stock option to purchase shares of our common stock-based on the Exchange Ratio (the “Recapitalization”).
On November 4, 2016, the consummation of the Recapitalization became effective and pursuant to the Recapitalization, we: (i) issued to the stockholders of Maven Network an aggregate of 9,533,355 shares of our common stock; and (ii) issued to MDB Capital Group, LLC (“MDB”), as an advisory fee, warrants to purchase 1,169,607 shares of our common stock. Existing stock options to purchase 175,000 shares of our common stock were assumed pursuant to the Recapitalization.
The Maven Technology Platform
We developed the Maven Platform, a proprietary online publishing platform that provides our owned and operated media businesses, Publisher Partners, whom are third parties producing and publishing content on their own domains, and individual creators contributing content to our owned and operated sites (“Expert Contributors”), the ability to produce and manage editorially focused content through tools and services provided by us. We have also developed proprietary advertising technology, techniques and relationships that allow us, our Publisher Partners and Expert Contributors to monetize online, editorially focused content through various display and video advertisements and tools and services for driving a subscription or membership based business and other monetization services (the “Monetization Solutions” and, together with the Maven Platform, the “Maven Platform Services”).
The Maven Platform comprises state-of-the-art publishing tools, video platforms, commenting features, social distribution channels, newsletter technology, machine learning content recommendations, notifications and other technology, that deliver a complete set of features to drive a digital media business in an entirely cloud-based suite of services. Our software engineering and product development teams are experienced at delivering these services at scale. We continue to develop the Maven Platform software by combining proprietary code with components from the open-source community, plus select commercial services as well as identifying, acquiring, and integrating other platform technologies, where we see unique long-term benefits to us.
The Maven Platform Services include:
| 1. | Content management, machine learning driven content recommendations, traffic redistribution, hosting and bandwidth; | |
| 2. | Video publishing, hosting, and player solution via an integrated set of third-party providers; | |
| 3. | Dashboards for our Publisher Partners as well as integration with leading analytics services like Google Analytics; | |
| 4. | Digital subscriptions and membership with paywalls, exclusive member access, and metering, credit card processing and reporting; | |
| 5. | User account management; | |
| 6. | User account migration to platform, including emails and membership data; | |
| 7. | Technical support team to train and support our Publisher Partners and staff (if applicable) on the Maven Platform; | |
| 8. | Advertising serving, trafficking/insertion orders, yield management, and reporting and collection; | |
| 9. | Dedicated customer service and sales center to assist our Publisher Partners with customer support, sign-ups, cancellations, and “saves”; |
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| 10. | Services for maintaining evergreen content to Expert Contributors; | |
| 11. | Various syndication integrations (e.g., Apple News, Facebook Instant Articles, Google AMP, Google news, and RSS feeds); | |
| 12. | Structured data objects (i.e., structured elements such as recipes or products); and | |
| 13 | Other features, as they may be added to the Maven Platform from time to time. |
Our Platform Partners use the Maven Platform Services to produce, manage, host and monetize their content in accordance with the terms and conditions of partner agreements between each of our Publisher Partners and us (the “Partnership Agreements”). Pursuant to the Partnership Agreements, we and our Publisher Partners split revenue generated from the Maven Platform Services used in connection with the Publisher Partner’s content based on certain metrics such as whether the revenue was from direct sales, was generated by our Publisher Partner or us, was generated in connection with a subscription or a membership, was based on standalone or bundled subscriptions or whether the revenue was derived from affiliate links.
Subject to the terms and conditions of each Partnership Agreement and in exchange for the Maven Platform Services, our Publisher Partners grant us, for so long as our Publisher Partner’s assets are hosted on the Maven Platform, (i) exclusive control of ads.txt with respect to our Publisher Partner’s domains and (ii) the exclusive right to include our Publisher Partner’s website domains and related URLs in our coalition in a consolidated listing assembled by third party measurement companies such as comScore, Nielsen and/or other similar measuring services selected by us. As such, the Maven Platform serves as the primary digital media and social platform with respect to each of our Publisher Partners’ website domains during the applicable term of each Partnership Agreement.
Our Brands and Growth Strategy
Our growth strategy is to continue to expand the coalition by adding new Publisher Partners in key verticals that management believes will expand the scale of unique users interacting on the Maven Platform. In each vertical, we seek to build around a leading brand, such as Sports Illustrated (for sports) and TheStreet (for finance), surround it with subcategory specialists, and further enhance coverage with individual expert contributors. The primary means of expansion is adding independent Publisher Partners and/or acquiring publishers that have premium branded content and can broaden the reach and impact of the Maven Platform.
Maven
We operate a best-in-class technology platform empowering premium publishers who impact, inform, educate, and entertain. We operate the media businesses for Sports Illustrated and TheStreet, and power more than 250 independent brands. These brands range from niche media businesses to world-leading independent publishers, operating on the Maven Platform, a shared digital publishing, monetization, and distribution platform.
Sports Illustrated
We assumed management of certain Sports Illustrated media assets (pursuant to the Sports Illustrated License Agreement) on October 4, 2019. Sports Illustrated is owned by ABG, a brand development, marketing, and entertainment company that owns a global portfolio of media, entertainment, and lifestyle brands. Since assuming management of the Sports Illustrated media assets, we have implemented significant changes to rebuild the historic brand and beacon of sports journalism, to evolve and expand the business, and to position it for growth and continued success going forward.
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TheStreet and Cramer Digital
TheStreet is a leading financial news and information provider to investors and institutions worldwide and has produced business news and market analysis for individual investors for more than 20 years. TheStreet brings its editorial tradition, strong subscription platform, and valuable membership base to us, and benefits from our mobile-friendly CMS, social, video, and monetization technology.
Finance and stock market expert Jim Cramer, who co-founded TheStreet, and his team of financial experts continue their influential work with the brand. As part of the closing of the TheStreet Merger, we entered into the Cramer Agreement with Mr. Cramer, pursuant to which Mr. Cramer and his production company, Cramer Digital, provides the Cramer Services, including certain content offerings under Mr. Cramer’s editorial control. On April 6, 2021, Cramer Digital notified us that it would cancel the optional third year of the term of the Cramer Agreement and we and Cramer Digital commenced negotiation of a new contract. On August 7, 2021, we entered into an extension of the Cramer Agreement to provide Mr. Cramer's services through September 30, 2021. Further, we are in discussions about an ongoing relationship.
HubPages
We acquired HubPages to enhance the user’s experience by increasing content, including from Expert Contributors. HubPages operates a network of 28 premium content channels that act as an open community for writers, explorers, knowledge seekers, and conversation starters to connect in an interactive and informative online space. HubPages operates in the United States.
Say Media
We acquired Say Media to enhance the user’s experience by increasing content. Now fully integrated into the Maven Platform, Say Media’s technology provides a comprehensive online media publishing platform and enables brand advertisers to engage today’s social media consumer through rich advertising experiences across its network of web properties. Say Media operated in the United States and previously maintained subsidiaries located in the United Kingdom, Canada, and Australia.
LiftIgniter
LiftIgniter provides a distribution and recommendation engine for premium publishers. The LiftIgniter platform connects users efficiently to hundreds of professional content creators, with custom recommendations of content aligned with users’ personal passions. Aided by machine-learning technology, publishers can identify and target those interested in their content. LiftIgniter activates the value of hosting hundreds of premium journalists on a single platform by interconnecting them through unified content distribution.
The Spun
The Spun (thespun.com), founded in September of 2012, is an independent sports publication that brings readers the most interesting athletic stories of the day. The Spun reaches approximately 15 million unique readers per month and focuses on the social media aspect of the industry.
Intellectual Property
We have seven patent registrations in the United States in connection with our technology. All of our patent registrations are owned by Maven Coalition.
Maven and Key Design
We currently have trademark registrations directed to our primary key design logo and the MAVEN name in the United States, Australia, China, the European Union (the “EU”), the United Kingdom, India, Japan, and New Zealand, as well as international Madrid Protocol registrations. We have trademark applications directed to our primary key design logo and the MAVEN name pending in Canada.
Moreover, we have a United States trademark registration for the word mark MAVEN COALITION, trademark registrations in the EU and the United Kingdom for the word mark THEMAVEN, and a United States trademark registration for the word mark A MAVEN CHANNEL. We have trademark registrations for the work mark A MAVEN CHANNEL in Australia, the EU, and the United Kingdom, and applications for the word mark A MAVEN CHANNEL pending in Canada, Mexico, and New Zealand, as well as an international Madrid Protocol registration.
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We have trademark registrations for the word marks BULL MARKET FANTASY, LIFTIGNITOR, SAY DAILY, SAY MEDIA, STREETLIGHTNING, AND TEMPEST in the United States and a trademark application for BULL MARKET FANTASY pending in Canada. We have trademark applications for the word marks THE ARENA, THE ARENA GROUP, AND SPORTSLIGHTNING pending in the United States.
TheStreet
We have trademark registrations for the word marks THESTREET and THESTREET.COM, and for the related THE STREET design mark in the United States. We have trademark registrations for the word marks ACTION ALERTS PLUS, ALPHA RISING, BANKING MY WAY, INCOME SEEKER, and REALMONEY in the United States, and a trademark registration for MAIN ST and design mark in the United States.
HubPages
We have trademark registrations for the word mark HUBPAGES in the United States, Australia, China, the EU, the United Kingdom, Japan, the Republic of Korea, Canada, Hong Kong, New Zealand, India, Peru, South Africa, Argentina, Brazil, Colombia, Indonesia, Mexico, and the Philippines, as well as an international Madrid Protocol registration.
We continue to file updated trademark applications to reflect our branding evolution and intend to continue strengthening our trademark portfolio as financial resources permit.
Our Publisher Partners and Licensing
In connection with our Partnership Agreements and any other applicable agreements between us and our Publisher Partners, (i) we and our affiliates own and retain (a) all right, title, and interest in and to the Maven Platform, Monetization Solutions and data collected by us, and (b) we and our licensors’ trademarks and branding and all software and technology we use to provide and operate the Maven Platform and Monetization Solutions, and (ii) each Publisher Partner owns and retains (a) all right, title, and interest in and to the Publisher Partner’s assets, content, and data collected by Publisher Partner and (b) each Publisher Partner’s trademarks and branding.
Seasonality
We expect to experience typical media company advertising and membership sales seasonality, which is strong in the fiscal fourth quarter and slower in the fiscal first quarter.
Competition
Currently, we believe that there are dozens of competitors delivering niche media content on the web and on mobile devices and an even broader array of general media companies and major media brands. All those competitors use mobile alerts, invest heavily in video, and leverage social media. We believe that we have developed distribution, production, and technology tactics that are superior because our management team’s tactics in the past with prior companies have proven to be highly engaging and effective for our particular model, which organizes channels into interest groups, led by key brands, such as Sports Illustrated in the sports vertical and TheStreet in the finance vertical.
The web provides unlimited access to the market by niche or general media companies, so there are a large number and variety of direct competitors of ours competing for audience and ad and membership dollars. The general business of online media, combined with some level or method of leveraging community attracts many potential entrants, and in the future, there may be strong competitors that will compete with us in general or in selected markets. These and other companies may be better financed and be able to develop their markets more quickly and penetrate those market more effectively. The following is a list of possible competitors and their respective categories:
| ● | Vice, Buzzfeed, Business Insider, et al. – niche content, leverages social, mobile, and video, and competes for ad dollars; |
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| ● | Fortune, CNN, ESPN, Yahoo!, Google, et al. – general content, major media companies, and competes for ad dollars; | |
| ● | WordPress, Medium, RebelMouse, Arc – content management software, open to all including experts and professionals, and competes for publishers; | |
| ● | Leaf Group Ltd. and Future PLC – competes for partners and ad dollars; | |
| ● | YouTube, Twitter, Facebook, Reddit – social platforms open to all including experts and professionals; and | |
| ● | Affiliate networks such as Liberty Alliance – competes for ad dollars. |
We believe that we compete on the basis of our technology, substantial scale in traffic, ease of use, recognized lead media brands, and platform evolution through a continuing development and acquisition program. We believe that our scale, methods, technology and experience enable us to compete for a material amount of market share of media dollars and membership revenue.
Government Regulations
Our operations are subject to a number of United States federal and state laws and regulations that involve privacy, rights of publicity, data protection, content regulation, intellectual property, or other subjects. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.
A number of government authorities, both in the United States and abroad, and private parties are increasing their focus on privacy issues and the use of personal information. All states have enacted some form of data privacy legislation, including data security and breach notification laws in all 50 states, and some form of regulation regarding the collection, use and disclosure of personal information at the federal level and in several states. California has been the most active in the area of consumer privacy legislation, including passing a comprehensive law requiring transparency, access, and choice known as the California Consumer Privacy Act of 2018 (the “CCPA”), which was amended in November 2020 by a ballot measure known as the California Privacy Rights Act (the “CPRA”). The CCPA went into effect January 1, 2020, with enforcement having begun in June 2020. The CPRA goes into effect over time, with enforcement to begin July 2023. Other states are also considering comprehensive consumer privacy legislation. Certain states have also enacted legislation requiring certain encryption technologies for the storage and transmission of personally identifiable information, including credit card information, and more states are considering laws for or have enacted laws about information security, which may require the adoption of written information security policies that are consistent with state laws if businesses have personal information of residents of those states. Data privacy and information security legislation is also being considered at the federal level, concerning the privacy of individuals and use of internet and marketing information. In the United States, the Federal Trade Commission (“FTC”) and attorneys general in several states have oversight of business operations concerning the use of personal information and breaches of the privacy laws under existing consumer protection laws. In particular, an attorney general or the FTC may examine privacy policies to ensure that a company discloses all material practices and fully complies with representations in the policies regarding the manner in which the information provided by consumers and other visitors to a website is used and disclosed by it, and the failure to do so could give rise to a complaint under state or federal unfair competition or consumer protection laws. The California Attorney General has begun aggressively investigating companies, especially those with websites, with respect to CCPA compliance and these investigations reportedly include inquiries into issues for which there has not yet been clear guidance issued by the state, such as regarding third party cookies that collect personal information from users when they visit our and other websites.
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We review our privacy policies and overall operations on a regular basis to ensure compliance with applicable United States federal and state laws, and to the extent applicable, any foreign laws. We launched a CCPA compliance program in January 2020 and at the end of 2020 reviewed the program and made adjustments to our privacy notice and compliance program practices to account for our evolving practices and the new CCPA regulations, which were promulgated in July 2020 and continue to be subject to ongoing rulemaking. We believe the position we take regarding various CCPA issues, including third party cookies, is based on sound and good faith interpretations of the law based on consultation with legal counsel. However, there are conflicting interpretations of the law that have been adopted by various parties in the digital media industry, and given the lack of guidance to date on many of these issues, our compliance posture on some issues might not be accepted by the State of California.
In addition to the laws of the United States, we may be subject to foreign laws regulating web sites and online services, and the laws in some jurisdictions outside of the United States are stricter than the laws in the United States. For instance, in May 2018, the General Data Protection Regulation (the “GDPR”) went into effect in the EU and European Economic Area and Switzerland. The GDPR includes operational requirements for companies that receive or process personal data of residents of the EU that include significant penalties for non-compliance. In addition, some EU countries are considering or have passed legislation implementing additional data protection requirements or requiring local storage and processing of personal data or similar requirements that could increase the cost and complexity of delivering our services. How the GDPR will be fully applied to online services, including cookies and digital advertising, is still being determined through ongoing rulemaking and evolving interpretation by applicable authorities. We operate a GDPR compliance program that we believe, based on our good faith interpretation of the GDPR in consultation with counsel, is consistent with our obligations under that law. The highest court in the EU recently ruled that the United States/EU Privacy Shield was inadequate under GDPR and questioned the viability or legality of any EU to United States personal data transfer methods. We are working to address this issue, for instance, including standard contractual clauses as part of our Data Processing Agreements, and we continue to monitor the development of EU to United States personal data transfer methods and the law relating thereto.
Social networking websites are under increasing scrutiny. Legislation has been introduced on the state and federal level that could regulate social networking websites. Some rules call for more stringent age-verification techniques, attempt to mandate data retention or data destruction by Internet providers, and impose civil and/or criminal penalties on owners or operators of social networking websites.
The FTC regularly considers issues relating to online behavioral advertising (a/k/a interest-based advertising), which is a significant revenue source for us, and Congress and state legislatures are frequently asked to regulate this type of advertising, including requiring consumers to provide express consent for tracking purposes, so that advertisers may know their interests and are, therefore, able to serve them more relevant, targeted ads. Targeted ads generate higher per impression fees than non-targeted ads. New laws, or new interpretations of existing laws, could potentially place restrictions on our ability to utilize our database and other marketing data (e.g., from third parties) on our own behalf and on behalf of our advertising clients, which may adversely affect our business.
Legislation concerning the above described online activities has either been enacted or is in various stages of development and implementation in other countries around the world and could affect our ability to make our websites available in those countries as future legislation is made effective. It is possible that state and foreign governments might also attempt to regulate our transmissions of content on our website or prosecute us for violations of their laws. United States law offers limited safe harbors and immunities to publishers for certain liability arising out of user-posted content, but other countries do not. Further, there are a number of legislative proposals in the United States, and internationally, that could impose new obligations in areas affecting our business, such as liability for copyright infringement by third parties and liability for defamation or other claims arising out of user-posted content. Our business could be negatively impacted if applicable laws subject us to greater regulation or risk of liability.
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Our business could also be adversely affected if regulatory enforcement authorities, such as the California Attorney General or EU/EEA data protection authorities, take issue with any of our approaches to compliance, or if new laws, regulations or decisions regarding the collection, storage, transmission, use and/or disclosure of personal information are implemented in such ways that impose new or additional technology requirements on us, limit our ability to collect, transmit, store and use or disclose the information, or if government authorities or private parties challenge our data privacy and/or security practices that result in liability to, or restrictions, on us, or we experience a significant data or information breach which would require public disclosure under existing notification laws and for which we may be liable for damages and/or penalties.
Furthermore, governments of applicable jurisdictions might attempt to regulate our transmissions or levy sales or other taxes relating to our activities even though we do not have a physical presence and/or operate in those jurisdictions. As our platforms, products and advertisement activities are available over the Internet anywhere in the world, multiple jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each of those jurisdictions and pay various taxes in those jurisdictions. We address state and local jurisdictions where we believe we have nexus, however, there can be no assurance that we have complied with all jurisdictions that may assert that we owe taxes.
Employees
Our total number of employees as of June 30, 2021 was 328, of which 290 were full-time employees.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Section 13 of the Exchange Act, are available free of charge after we electronically file or furnish them to the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically.
There are numerous factors that affect our business and operating results, many of which are beyond our control. The following is a description of significant factors that might cause our future results to differ materially from those currently expected. The risks described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. If any of the following risks actually occur, our business, financial condition, results of operations, cash flows, and/or our ability to pay our debts and other liabilities could suffer. As a result, the trading price and liquidity of our securities could decline, perhaps significantly, and you could lose all or part of your investment. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See the section entitled “Cautionary Note Concerning Forward-Looking Statements.”
RISKS RELATED TO OUR BUSINESS AND OUR FINANCIAL CONDITION
Our business operations have been and may continue to be materially and adversely affected by the outbreak of the novel coronavirus (“COVID-19”). An outbreak of respiratory illness caused by COVID-19 emerged in late 2019 and has spread globally. In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world. Many national governments and sports authorities around the world made the decision to postpone/cancel high attendance sports events in an effort to reduce the spread of the COVID-19 virus. In addition, many governments and businesses limited non-essential work activity, furloughed, and/or terminated many employees and closed some operations and/or locations, all of which has had a negative impact on the economic environment.
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Beginning in March 2020, as a result of the COVID-19 pandemic, our revenue and earnings began to decline largely due to the cancellation of high attendance sports events and the resulting decrease in traffic to the Maven Platform and advertising revenue. This initial decrease in revenue and earnings were partially offset by revenues generated by TheStreet, as well as some recovery of sporting events (including, in some cases, limited in-person attendance) that have generated content for the Sports Illustrated Licensed Brands. Through the spring of 2021, we have increasingly seen sports leagues and events return to pre-pandemic scheduling, as well as additional lifting of restrictions on in-person attendance at sporting events, which have continued to result in some recovery of our operational and financial performance. Despite this initial recovery, the future impact, or continued impact, from the COVID-19 pandemic remains uncertain.
The extent of the impact on our operational and financial performance will depend, in part, on future developments, including the duration and spread of the COVID-19 pandemic, related group gathering and sports event advisories and restrictions, and the extent and effectiveness of containment actions taken, all of which remain uncertain at the time of issuance of our accompanying consolidated financial statements.
These and other impacts of the COVID-19 pandemic, or other pandemics or epidemics, could have the effect of heightening many of the other risks described in this Annual Report under the “Risk Factors” section.
Because of the effects of COVID-19 pandemic and the uncertainty about their persistence, we may need to raise more capital to continue operations. At December 31, 2020, we had cash of approximately $9.0 million. From January 1, 2021 through the issuance date of our accompany consolidated financial statements, we raised aggregate net proceeds of approximately $19.6 million through private placements of our common stock, of which approximately $11 million was applied to the cash portion of the purchase of The Spun. As of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued, we had cash of approximately $7.5 million. Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the section entitled “Future Liquidity,” for additional information. We have seen stabilization in our markets since May of 2020 and believe that based on our current assessment of the impact of COVID-19, we have sufficient resources to fully fund our business operations through 12 months from the issuance date of our accompanying consolidated financial statements. However, due to the continuing uncertainty regarding the duration of the impact of COVID-19 and its effect on our financial performance and the potential that our traffic and advertising revenue becomes destabilized again, we may require additional capital. We have not had difficulties accessing the capital markets during 2020 and 2021, however, due to the continuing uncertainty surrounding COVID-19, we may experience difficulties in the future.
As market conditions present uncertainty as to our ability to secure additional capital, there can be no assurances that we will be able to secure additional financing on acceptable terms, or at all, as and when necessary to continue to conduct operations. Our future liquidity and capital requirements will depend upon numerous factors, including the success of our offerings and competing technological and market developments. We may need to raise funds through public or private financings, strategic relationships, or other arrangements. There can be no assurance that such funding, will be available on terms acceptable to us, or at all. Furthermore, any equity financing will be dilutive to existing stockholders, and debt financing, if available, may involve restrictive covenants that may limit our operating flexibility with respect to certain business matters. Strategic arrangements may require us to relinquish our rights or grant licenses to some or substantial parts of our intellectual property. If funds are raised through the issuance of equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution in net book value per share, and such equity securities may have rights, preferences, or privileges senior to those of the holders of our existing capital stock. If adequate funds are not available on acceptable terms, we may not be able to continue operating, develop or enhance products, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, operating results, and financial condition.
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We have incurred losses since our inception, have yet to achieve profitable operations, and anticipate that we will continue to incur losses for the foreseeable future. We have had losses from inception, and as a result, have relied on capital funding or borrowings to fund our operations. Our accumulated deficit as of December 31, 2020 was approximately $162.1 million. We have not issued our financial statements for any periods during fiscal 2021. While we anticipate generating positive cash flow in fiscal 2021, the uncertainty surrounding the COVID-19 pandemic yields some doubt as to our ability to do so and could require us to raise additional capital. We cannot predict whether we will be able to continue to find capital to support our business plan if the negative effects of the COVID-19 pandemic continue longer than anticipated.
We identified material weaknesses in our internal control over financial reporting. If we do not adequately address these material weaknesses or if other material weaknesses or significant deficiencies in our internal control over financial reporting are discovered, our financial statements could contain material misstatements and our business, operations and stock price may be adversely affected. As disclosed under Item 9A, Controls and Procedures, of this Annual Report, our management has identified material weaknesses in our internal control over financial reporting at December 31, 2020 and we expect to continue to have material weaknesses in our internal controls over financial reporting at March 31, 2021, June 30, 2021 and September 30, 2021. We expect to have remediated our material weaknesses in our internal control over financial reporting by December 31, 2021, of which there can be no assurance. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Although no material misstatement of our historical financial statements was identified, the existence of these material weaknesses or significant deficiencies could result in material misstatements in our financial statements and we could be required to restate our financial statements. Further, significant costs and resources may be needed to remediate the identified material weaknesses or any other material weaknesses or internal control deficiencies. If we are unable to remediate, evaluate, and test our internal controls on a timely basis in the future, management will be unable to conclude that our internal controls are effective and our independent registered public accounting firm will be unable to express an unqualified opinion on the effectiveness of our internal controls. If we cannot produce reliable financial reports, investors may lose confidence in our financial reporting, the price of our common stock could be adversely impacted and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which could negatively impact our business, financial condition, and results of operations.
As of the date of filing this Annual Report, we currently lack certain internal controls over our financial reporting. While we have three independent directors serving on our board of directors (our “Board”), have added to our accounting staff, and have hired a new Chief Technology Officer, we are implementing such controls at this time. The lack of such controls makes it difficult to ensure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized, and reported as and when required.
We cannot assure you that we will be able to develop and implement the necessary internal controls over financial reporting. The absence of such internal controls may inhibit investors from purchasing our shares and may make it more difficult for us to raise debt or equity financing.
If we fail to retain current users or add new users, or if our users decrease their level of engagement with the Maven Platform, our business would be seriously harmed. The success of our business heavily depends on the size of our user base and the level of engagement of our users. Thus, our business performance will also become increasingly dependent on our ability to increase levels of user engagement in existing and new markets. We are continuously subject to a highly competitive market in order to attract and retain our users’ attention. A number of factors could negatively affect user retention, growth, and engagement, including if:
| ● | users increasingly engage with competing platforms instead of ours; | |
| ● | we fail to introduce new and exciting products and services, or such products and services do not achieve a high level of market acceptance; | |
| ● | we fail to accurately anticipate consumer needs, or we fail to innovate and develop new software and products that meet these needs; |
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| ● | we fail to price our products competitively; | |
| ● | we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display; | |
| ● | we are unable to combat spam, bugs, malwares, viruses, hacking, or other hostile or inappropriate usage on our products; | |
| ● | there are changes in user sentiment about the quality or usefulness of our existing products in the short-term, long-term, or both; | |
| ● | there are increased user concerns related to privacy and information sharing, safety, or security; | |
| ● | there are adverse changes in our products or services that are mandated by legislation, regulatory authorities, or legal proceedings; | |
| ● | technical or other problems frustrate the user experience, particularly if those problems prevent us from delivering our products in a fast and reliable manner; | |
| ● | we, our Publisher Partners, or other companies in our industry are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; or | |
| ● | we fail to maintain our brand image or our reputation is damaged. |
Any decrease in user retention, growth, or engagement could render our products less attractive to users, advertisers, or our Publisher Partners, thereby reducing our revenues from them, which may have a material and adverse impact on our business, financial condition, and results of operations. In addition, there can be no assurance that we will succeed in developing products and services that eventually become widely accepted, that we will be able to timely release products and services that are commercially viable, or that we will establish ourselves as a successful player in a new business area. Our inability to do so would have an adverse impact on our business, financial condition, and results of operations.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed. The digital media industry is fragmented and highly competitive. There are many players in the digital media market, many with greater name recognition and financial resources, which may give them a competitive advantage. Some of our current and potential competitors have substantially greater financial, technical, marketing, distribution, and other resources than we do. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, customer, and user requirements and trends. In addition, our customers and strategic partners may become competitors in the future. Certain of our competitors may be able to negotiate alliances with strategic partners on more favorable terms than we are able to negotiate. Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of the Maven Platform to achieve or maintain more widespread market acceptance, any of which could adversely affect our revenues and operating results. With the introduction of new technologies, the evolution of the Maven Platform, and new market entrants, we expect competition to intensify in the future.
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We may have difficulty managing our growth. We have added, and expect to continue to add, publisher partner and end-user support capabilities, to continue software development activities, and to expand our administrative operations. In the past two years, we have entered into multiple strategic transactions. These strategic transactions, which have significantly expanded our business, have and are expected to place a significant strain on our managerial, operational, and financial resources. To manage any further growth, we will be required to improve existing, and implement new, operational, customer service, and financial systems, procedures and controls and expand, train, and manage our growing employee base. We also will be required to expand our finance, administrative, technical, and operations staff. There can be no assurance that our current and planned personnel, systems, procedures, and controls will be adequate to support our anticipated growth, that management will be able to hire, train, retain, motivate, and manage required personnel or that our management will be able to successfully identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business could be harmed.
The strategic relationships that we may be able to develop and on which we may come to rely may not be successful. We will seek to develop strategic relationships with advertising, media, technology, and other companies to enhance the efforts of our market penetration, business development, and advertising sales revenues. These relationships are expected to, but may not, succeed. There can be no assurance that these relationships will develop and mature, or that potential competitors will not develop more substantial relationships with attractive partners. Our inability to successfully implement our strategy of building valuable strategic relationships could harm our business.
We rely heavily on our ability to collect and disclose data and metrics in order to attract new advertisers and retain existing advertisers. Any restriction, whether by law, regulation, policy, or other reason, on our ability to collect and disclose data that our advertisers find useful would impede our ability to attract and retain advertisers. Our advertising revenue could be seriously harmed by many other factors, including:
| ● | a decrease in the number of active users of the Maven Platform; |
| ● | our inability to create new products that sustain or increase the value of our advertisements; |
| ● | our inability to increase the relevance of targeted advertisements shown to users; |
| ● | adverse legal developments relating to advertising, including changes mandated by legislation, regulation, or litigation; and |
| ● | difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines. |
The occurrence of any of these or other factors could result in a reduction in demand for advertisements, which may reduce the prices we receive for our advertisements or cause advertisers to stop advertising with us altogether, either of which would negatively affect our business, financial condition, and results of operations.
The sales and payment cycle for online advertising is long, and such sales, which have been significantly impacted by the COVID-19 pandemic, may not occur when anticipated or at all. The decision process is typically lengthy for brand advertisers and sponsors to commit to online campaigns. Some of their budgets are planned a full year in advance. The COVID-19 pandemic significantly impacted the amount and pricing of advertising throughout the media industry and it is uncertain when and to what extent advertisers will return to more normal spending levels. The decision process for such purchases, even in normal business situations, is subject to delays and aspects that are beyond our control. In addition, some advertisers and sponsors take months after the campaign runs to pay, and some may not pay at all, or require partial “make-goods” based on performance.
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We are dependent on the continued services and on the performance of our key executive officers, management team, and other key personnel, the loss of which could adversely affect our business. Our future success largely depends upon the continued services of our key executive officers, management team, and other key personnel. The loss of the services of any of such key personnel could have a material adverse effect on our business, operating results, and financial condition. We depend on the continued services of our key personnel as they work closely with both our employees and our Publisher Partners. Such key personnel are also responsible for our day-to-day operations. Although we have employment agreements with some of our key personnel, these are at-will employment agreements, albeit with non-competition and confidentiality provisions and other rights typically associated with employment agreements. We do not believe that any of our executive officers are planning to leave or retire in the near term; however, we cannot assure that our executive officers or members of our management team will remain with us. We also depend on our ability to identify, attract, hire, train, retain, and motivate other highly skilled technical, managerial, sales, operational, business development, and customer service personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate, or retain sufficiently qualified personnel. The loss or limitation of the services of any of our executive officers, members of our management team, or key personnel, including our regional and country managers, or the inability to attract and retain additional qualified key personnel, could have a material adverse effect on our business, financial condition, or results of operations.
We are dependent on the continued services and on the performance of key third party content contributors, the loss of which could adversely affect our business. We rely on content contributed by third party providers, which has in turn attracted users that drive advertising and subscription revenue. The loss of the services of any of such key contributors could have a material adverse effect on our business, operating results, and financial condition. Although we have service agreements with some of our key contributors, many are short term in nature or have cancelation clauses in the agreements. We also depend on our ability to identify, attract, and retain, other highly skilled third-party content contributors. Competition for such contributors is intense, and there can be no assurance that we will be able to successfully attract, assimilate, or retain them. The loss or limitation of the services of any of our key third party contributors, or the inability to attract and retain additional qualified key contributors, could have a material adverse effect on our business, financial condition, or results of operations.
Our revenues could decrease if the Maven Platform does not continue to operate as intended. The Maven Platform performs complex functions and is vulnerable to undetected errors or unforeseen defects that could result in a failure to operate or inefficiency. There can be no assurance that errors and defects will not be found in current or new products or, if discovered, that we will be able to successfully correct them in a timely manner or at all. The occurrence of errors and defects could result in loss of or delay in revenue, loss of market share, increased development costs, diversion of development resources and injury to our reputation or damage to our efforts to expand brand awareness.
Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results. Our growth will depend in part on the ability of our users and Publisher Partners to access the Maven Platform at any time and within an acceptable amount of time. We believe that the Maven Platform is proprietary and we rely on the expertise of members of our engineering, operations, and software development teams for their continued performance. It is possible that the Maven Platform may experience performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing the Maven Platform software simultaneously, denial of service attacks, or other security related incidents. We may not be able to identify the cause or causes of any performance problems within an acceptable period of time. It may be that it will be difficult to maintain and/or improve our performance, especially during peak usage times and as the Maven Platform becomes more complex and our user traffic increases. If the Maven Platform software is unavailable or if our users are unable to access it within a reasonable amount of time or at all, our business would be negatively affected. Therefore, in the event of any of the factors described above, or certain other failures of our infrastructure, partner or user data may be permanently lost. Moreover, the Partnership Agreements with our Publisher Partners include service level standards that obligate us to provide credits or termination rights in the event of a significant disruption in the Maven Platform. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.
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We operate our exclusive coalition of professional-managed online media channels on third party cloud platforms and data center hosting facilities. We rely on software and services licensed from, and cloud platforms provided by, third parties in order to offer our digital media services. Any errors or defects in third-party software or cloud platforms could result in errors in, or a failure of, our digital media services, which could harm our business. Any damage to, or failure of, these third-party systems generally could result in interruptions in the availability of our digital media services. As a result of this third-party reliance, we may experience the aforementioned issues, which could cause us to render credits or pay penalties, could cause our Publisher Partners to terminate their contractual arrangements with us, and could adversely affect our ability to grow our audience of unique visitors, all of which could reduce our ability to generate revenue. Our business would also be harmed if our users and potential users believe our product and services offerings are unreliable. In the event of damage to, or failure of, these third-party systems, we would need to identify alternative channels for the offering of our digital media services, which would consume substantial resources and may not be effective. We are also subject to certain standard terms and conditions with Amazon Web Services and Google Cloud related to data storage purposes. These providers have broad discretion to change their terms of service and other policies with respect to us, and those changes may be unfavorable to us. Therefore, we believe that maintaining successful partnerships with Amazon Web Services, Google Cloud, and other third-party suppliers is critical to our success.
Real or perceived errors, failures, or bugs in the Maven Platform could adversely affect our operating results and growth prospects. Because the Maven Platform is complex, undetected errors, failures, vulnerabilities, or bugs may occur, especially when updates are deployed. Despite testing by us, errors, failures, vulnerabilities, or bugs may not be found in the Maven Platform until after they are deployed to our customers. We expect from time to time to discover software errors, failures, vulnerabilities, and bugs in the Maven Platform and anticipate that certain of these errors, failures, vulnerabilities, and bugs will only be discovered and remediated after deployment to our Publisher Partners and used by subscribers. Real or perceived errors, failures, or bugs in our software could result in negative publicity, loss of or delay in market acceptance of the Maven Platform, loss of competitive position, or claims by our Publisher Partners or subscribers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.
Malware, viruses, hacking attacks, and improper or illegal use of the Maven Platform could harm our business and results of operations. Malware, viruses, and hacking attacks have become more prevalent in our industry and may occur on our systems in the future. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware, or other computer equipment, and the inadvertent transmission of computer viruses could harm our business, financial condition and operating results. Any failure to detect such attack and maintain performance, reliability, security and availability of products and technical infrastructure to the satisfaction of our users may also seriously harm our reputation and our ability to retain existing users and attract new users.
Our information technology systems are susceptible to a growing and evolving threat of cybersecurity risk. Any substantial compromise of our data security, whether externally or internally, or misuse of agent, customer, or employee data, could cause considerable damage to our reputation, cause the public disclosure of confidential information, and result in lost sales, significant costs, and litigation, which would negatively affect our financial position and results of operations. Although we maintain policies and processes surrounding the protection of sensitive data, which we believe to be adequate, there can be no assurances that we will not be subject to such claims in the future.
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If we are unable to protect our intellectual property rights, our business could suffer. Our success significantly depends on our proprietary technology. We rely on a combination of copyright, trademark and trade secret laws, employee and third-party non-disclosure and invention assignment agreements and other methods to protect our proprietary technology. However, these only afford limited protection, and unauthorized parties may attempt to copy aspects of the Maven Platform’s features and functionality, or to use information that we consider proprietary or confidential. There can be no assurance that the Maven Platform will be protectable by patents, but if they are, any efforts to obtain patent protection that is not successful may harm our business in that others will be able to use our technologies. For example, previous disclosures or activities unknown at present may be uncovered in the future and adversely impact any patent rights that we may obtain. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. There can be no assurance that the steps taken by us to protect our proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, copyrights, and similar proprietary rights. If we resort to legal proceedings to enforce our intellectual property rights, those proceedings could be expensive and time-consuming and could distract our management from our business operations. Our business, profitability and growth prospects could be adversely affected if we fail to receive adequate protection of our proprietary rights.
We could be required to cease certain activities and/or incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights. Some of our competitors, and other third parties, may own technology patents, copyrights, trademarks, trade secrets and website content, which they may use to assert claims against us. We cannot assure you that we will not become subject to claims that we have misappropriated or misused other parties’ intellectual property rights. Any claim or litigation alleging that we have infringed or otherwise violated intellectual property or other rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of our management and technical personnel.
The results of any intellectual property litigation to which we might become a party may require us to do one or more of the following:
| ● | cease making, selling, offering, or using technologies or products that incorporate the challenged intellectual property; |
| ● | make substantial payments for legal fees, settlement payments, or other costs or damages; |
| ● | obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or |
| ● | redesign technology to avoid infringement. |
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us, such payments or costs could have a material adverse effect upon our business and financial results.
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We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection, and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, personal information, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, employee classification, product liability, taxation, economic or other trade prohibitions or sanctions, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, monetary penalties or other government scrutiny. In addition, foreign data protection, privacy, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. Many of these laws and regulations are still evolving and could be interpreted or applied in ways that could limit or harm our business, require us to make certain fundamental and potentially detrimental changes to the products and services we offer, or subject us to claims. For example, laws relating to the liability of providers of online services for activities of their users and other third-parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright, and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users. In addition, there have been calls by members of Congress, from both parties, to limit the scope of the current immunities and safe harbors afforded online publishers with regard to user content and communications under the federal Digital Millennium Copyright Act and the federal Communications Decency Act. Any material reduction of those protections would make us more vulnerable to third party claims arising out of user content published by our online services.
These United States federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change, which could adversely affect our business. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. Any change in legislation and regulations could affect our business. For example, regulatory or legislative actions affecting the manner in which we display content to our users or obtain consent to various practices could adversely affect user growth and engagement. Such actions could affect the manner in which we provide our services or adversely affect our financial results.
Furthermore, significant penalties could be imposed on us for failure to comply with various statutes or regulations. Violations may result from:
| ● | ambiguity in statutes; |
| ● | regulations and related court decisions; |
| ● | the discretion afforded to regulatory authorities and courts interpreting and enforcing laws; |
| ● | new regulations affecting our business; and |
| ● | changes to, or interpretations of, existing regulations affecting our business. |
While we prioritize ensuring that our business and compensation model are compliant, and that any product or income related claims are truthful and non-deceptive, we cannot be certain that the FTC or similar regulatory body in another country will not modify or otherwise amend its guidance, laws, or regulations or interpret in a way that would render our current practices inconsistent with the same.
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Our services involve the storage and transmission of digital information; therefore, cybersecurity incidents, including those caused by unintentional errors and those intentionally caused by third parties, may expose us to a risk of loss, unauthorized disclosure or other misuse of this information, litigation liability and regulatory exposure, reputational harm and increased security costs. We and our third-party service providers experience cyber-attacks of varying degrees on a regular basis. We expect to incur significant costs in ongoing efforts to detect and prevent cybersecurity-related incidents and these costs may increase in the event of an actual or perceived data breach or other cybersecurity incident. The COVID-19 pandemic has increased opportunities for cyber-criminals and the risk of potential cybersecurity incidents, as more companies and individuals work online. We cannot ensure that our efforts to prevent cybersecurity incidents will succeed. An actual or perceived breach of our cybersecurity could impact the market perception of the effectiveness of our cybersecurity controls. If our users or business partners, including our Publisher Partners, are harmed by such an incident, they could lose trust and confidence in us, decrease their use of our services or stop using them in entirely. We could also incur significant legal and financial exposure, including legal claims, higher transaction fees and regulatory fines and penalties, which in turn could have a material and adverse effect on our business, reputation and operating results. While our insurance policies include liability coverage for certain of these types of matters, a significant cybersecurity incident could subject us to liability or other damages that exceed our insurance coverage.
Prior employers of our employees may assert violations of past employment arrangements. Our employees are highly experienced, having worked in our industry for many years. Prior employers may try to assert that our employees are breaching restrictive covenants and other limitations imposed by past employment arrangements. We believe that all of our employees are free to work for us in their various capacities and have not breached past employment arrangements. Notwithstanding our care in our employment practices, a prior employer may assert a claim. Such claims will be costly to contest, highly disruptive to our work environment, and may be detrimental to our operations.
Our products may require availability of components or known technology from third parties and their non-availability can impede our growth. We license/buy certain technology integral to our products from third parties, including open-source and commercially available software. Our inability to acquire and maintain any third-party product licenses or integrate the related third-party products into our products in compliance with license arrangements, could result in delays in product development until equivalent products can be identified, licensed, and integrated. We also expect to require new licenses in the future as our business grows and technology evolves. We cannot provide assurance that these licenses will continue to be available to us on commercially reasonable terms, if at all.
Government regulations may increase our costs of doing business. The adoption or modification of laws or regulations relating to online media, communities, commerce, security and privacy could harm our business, operating results and financial condition by increasing our costs and administrative burdens. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, security, libel, consumer protection, and taxation apply. Laws and regulations directly applicable to Internet activities are becoming more diverse and prevalent in all global markets. We must comply with regulations in the United States, as well as any other regulations adopted by other countries where we may do business. The growth and development of Internet content, commerce and communities may prompt calls for more stringent consumer protection laws, privacy laws and data protection laws, both in the United States and abroad, as well as new laws governing the taxation of these activities. Compliance with any newly adopted laws may prove difficult for us and may harm our business, operating results, and financial condition.
We may face lawsuits or incur liabilities in the future in connection with our businesses. In the future, we may face lawsuits or incur liabilities in connection with our businesses. For example, we could face claims relating to information that is published or made available on the Maven Platform. In particular, the nature of our business exposes us to claims related to defamation, intellectual property rights and rights of publicity and privacy. We might not be able to monitor or edit a significant portion of the content that appears on the Maven Platform. This risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions may be unclear and where we may be less protected under local laws than we are in the United States. We could also face fines or orders restricting or blocking our services in particular geographies as a result of content hosted on our services. If any of these events occur, our business could be seriously harmed.
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RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
There may be no liquid market for our common stock. We provide no assurances of any kind or nature whatsoever that an active market for our common stock will ever develop. There has been no sustained activity in the market for our common stock. Investors should understand that there may be no alternative exit strategy for them to recover or liquidate their investments in our common stock. Accordingly, investors must be prepared to bear the entire economic risk of an investment in us for an indefinite period of time. Even if an active trading market develops over time, we cannot predict how liquid that market might become. Our common stock is quoted on the OTC Markets Group, Inc.’s (the “OTCM”) Pink Open Market (the “OTC Pink”). Trading in stock quoted on over-the-counter markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:
| ● | Quarterly variations in our results of operations or those of our competitors; |
| ● | Announcements by us or our competitors of acquisitions, new products and services, significant contracts, commercial relationships, or capital commitments; |
| ● | Disruption or substantive changes to our operations, including the impact of the COVID-19 pandemic; |
| ● | Variations in our sales and earnings from period to period; |
| ● | Commencement of, or our involvement in, litigation; |
| ● | Any major change in our board or management; |
| ● | Changes in governmental regulations or in the status of our regulatory approvals; and |
| ● | General market conditions and other factors, including factors unrelated to our own operating performance. |
We are subject to the reporting requirements of the United States securities laws, which will require expenditure of capital and other resources, and may divert management’s attention. We are a public reporting company subject to the information and reporting requirements of the Exchange Act, the Sarbanes-Oxley Act (“Sarbanes”), and other applicable securities rules and regulations. Complying with these rules and regulations have caused us and will continue to cause us to incur additional legal and financial compliance costs, make some activities more difficult, be time-consuming or costly, and continue to increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. We are not current in our SEC filings and the cost of completing historical filings in addition to maintaining current financial reporting has been, and will continue to be, a financial burden for us. If we fail to or are unable to comply with Sarbanes, we will not be able to obtain independent accountant certifications that Sarbanes requires publicly traded companies to obtain. Further, by complying with public disclosure requirements, our business and financial condition are more visible, which we believe may result in the likelihood of increased threatened or actual litigation, including by competitors and other third parties. Compliance with these additional requirements may also divert management’s attention from operating our business. Any of these may adversely affect our operating results.
We may not be able to attract the attention of major brokerage firms or securities analysts in our efforts to raise capital. In due course, we plan to seek to have our common stock quoted on a national securities exchange in the United States. There can be no assurance that we will be able to garner a quote for our common stock on an exchange. Even if we are successful in doing so, security analysts and major brokerage houses may not provide coverage of us. We may also not be able to attract any brokerage houses to conduct secondary offerings with respect to our securities.
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Because we are subject to the “penny stock” rules and regulations, the level of trading activity in our common stock is limited, and our stockholders may have difficulties selling their shares. SEC regulations define penny stocks to be any non-exchange equity security that has a market price of less than $5.00 per share, subject to certain exemptions. The regulations of the SEC promulgated under the Exchange Act require additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. Unless an exception is available, those regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a standardized risk disclosure schedule prepared by the SEC, to provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the purchaser’s account, to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a stock that becomes subject to the penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage market investor interest in and limit the marketability of our common stock. There can be no assurance that our common stock will qualify for exemption from the penny stock rules. In any event, even if our common stock were exempt from the penny stock rules, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
In addition to the “penny stock” rules promulgated by the SEC, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock.
Item 1B. Unresolved Staff Comments
Not Applicable.
On April 25, 2018, we entered into an office sublease agreement (the “1500 Fourth Ave Sublease”) to sublease a portion of the “master premises” consisting of 7,457 rentable square feet of office space for our then-executive offices at 1500 Fourth Avenue, Suite 200, Seattle, Washington 98101. The 1500 Fourth Ave Sublease commenced on June 1, 2018 with an expiration date of October 31, 2021. The amount of monthly rent payable per square foot under the 1500 Fourth Ave Sublease was $25.95 for the first year, $35.00 for the second year, $36.00 for the third year, and $37.00 for the remainder of the term. On March 1, 2020, we assumed the entire lease for the remaining term of 20 months.
On September 19, 2018, we entered into a membership agreement with WeWork for office space located at 995 Market Street, San Francisco, California. The agreement commenced on October 1, 2018. We paid approximately $17,400 per month, which included certain conference room credits and printer credits. We also paid a service retainer in the amount of $26,100. We terminated our membership agreement effective October 31, 2020.
On December 12, 2018, as part of our acquisition of Say Media, we assumed the office lease (the “Portland Lease”) of 10,000 rentable square feet at 424 SW Fourth Avenue, Portland, Oregon 97204. The Portland Lease began on July 1, 2015, and expired June 30, 2020. Monthly lease payments increased from $18,750 in July 2015 to $27,500 in June 2020.
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On August 7, 2019, as part of its acquisition of TheStreet, we assumed the office lease of approximately 35,000 rentable square feet at 14 Wall Street, 15th Floor, New York, New York 10005. The lease had a remaining term of 16 months, expiring on December 31, 2020. Monthly lease payments from January 1, 2016 through December 31, 2020 were $150,396. On October 30, 2020, we entered into a surrender agreement (the “Surrender Agreement”) pursuant to which we effectively surrendered the property back to the owner and landlord. Pursuant to the Surrender Agreement, we agreed to pay $68,868 per month from January 2021 through June 1, 2022 to satisfy the total outstanding balance of $1,239,626 owed to the lessor. The first $500,000 of payments was drawn from a security deposit, which is held by the lessor. The lessor agreed not to charge any late fees, interest charges, or other penalties relating to the surrender of the property.
Effective October 1, 2019, we entered into an office lease (the “Santa Monica Lease”) of approximately 5,258 rentable square feet at 301 Arizona Avenue, 4th Floor, Santa Monica, California 90401. The Santa Monica Lease has a term of 5 years, expiring on September 30, 2024. The initial monthly rent was $36,806 and increased to $37,910 in October 2020.
Effective October 3, 2019, we entered into a condominium lease (the “Washington Square Lease”) of a multifamily townhome at 26 Washington Square North, New York, New York 10011. The Washington Square Lease had a term of one year, expiring on October 2, 2020, with monthly rent payments of $10,000. This property was used by our executive officers when they were in New York for matters related to our business. We terminated this lease in March 2020 when we entered into the 30 West Lease (as defined below).
On January 14, 2020, we entered into an office sublease agreement (the “Liberty Street Sublease”) of approximately 40,868 rentable square feet at 225 Liberty Street, 27th Floor, New York, New York 10281, with an effective date of February 1, 2020 with lease payments commencing November 1, 2020 and expiring on November 30, 2032. Monthly lease payments from November 1, 2020 through October 31, 2025 are $252,019.
Effective March 1, 2020, we entered into a corporate apartment lease (the “30 West Lease”) at 30 West Street, New York, New York 10004. The 30 West Lease has a term of 18 months, expiring on August 31, 2021, with monthly lease payments of $8,000 through February 2021 and $8,500 from March 2021 through the expiration of the lease. We terminated this lease in December 2020.
We believe that the rates we are paying under our property leases are competitive in our various real estate markets, and we would be able to find comparable lease properties in the event we changed locations.
From time to time, we may be subject to claims and litigation arising in the ordinary course of business. We are not currently subject to any pending or threatened legal proceedings that we believe would reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
As of December 1, 2016, our common stock is quoted on the OTCM’s OTC Pink trading under the symbol “MVEN.”
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The following table sets forth the high and low bid prices during the periods indicated, as reported by the OTCM. Such prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Common Stock | ||||||||
| (MVEN) | ||||||||
| High | Low | |||||||
| 2021 | ||||||||
| First Quarter | $ | 3.00 | $ | 0.42 | ||||
| Second Quarter | $ | 1.04 | $ | 0.56 | ||||
| Third Quarter (1) | $ | 0.81 | $ | 0.50 | ||||
| 2020 | ||||||||
| First Quarter | $ | 0.99 | $ | 0.31 | ||||
| Second Quarter | $ | 0.80 | $ | 0.30 | ||||
| Third Quarter | $ | 1.12 | $ | 0.50 | ||||
| Fourth Quarter | $ | 0.90 | $ | 0.50 | ||||
| 2019 | ||||||||
| First Quarter | $ | 0.75 | $ | 0.40 | ||||
| Second Quarter | $ | 0.70 | $ | 0.37 | ||||
| Third Quarter | $ | 1.00 | $ | 0.50 | ||||
| Fourth Quarter | $ | 0.94 | $ | 0.56 | ||||
| (1) | Through August 12, 2021. |
Holders
As of August 12, 2021, there were approximately 250 holders of record of our common stock. We believe that there are additional holders of our common stock who have their stock in “street name” with their brokers. Currently, we cannot determine the approximate number of those street name holders. As of such date, 263,441,879 shares of our common stock were issued and outstanding.
Dividends
We have never paid cash dividends on our common stock, and our present policy is to retain any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On December 15, 2020, we entered into the Fourth Amendment, pursuant to which we agreed to repurchase from certain key personnel of HubPages, including Paul Edmondson, one of our officers, and his spouse, an aggregate of approximately 44,356 shares of our common stock at a price of $4.00 per share each month for a period of 24 months. The details of these repurchases are as follows:
| Period | (a) Total number of shares (or units purchased | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs | (d) Maximum number (or approximate dollar value) of shares (or units that may yet be purchased under the plans or programs | ||||||||||||
| December 30, 2020 | 44,356 | $ | 4.00 | - | 1,020,193 | |||||||||||
| January 29, 2021 | 44,356 | $ | 4.00 | - | 975,837 | |||||||||||
| March 1, 2021 | 44,356 | $ | 4.00 | - | 931,481 | |||||||||||
| June 1, 2021 (1) | 133,068 | $ | 4.00 | - | 798,413 | |||||||||||
| July 1, 2021 | 44,356 | $ | 4.00 | - | 754,057 | |||||||||||
| July 30, 2021 | 44,356 | $ | 4.00 | 709,701 | ||||||||||||
| (1) | Pursuant to the terms of the Fourth Amendment, we have the discretion to determine on a monthly basis whether to make a repurchase for such month. For the months of April and May 2021, we did not make any repurchases pursuant to the Fourth Amendment. Accordingly, in June 2021, we repurchased 133,068 shares, comprised of the 44,356 shares for April 2021, 44,356 shares for May 2021, and 44,356 shares for June 2021. |
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Recent Sales of Unregistered Securities
On January 1, 2020, we issued 562,500 shares of our common stock as restricted stock awards to certain members of our Board subject to continued service with us. The awards vest over a twelve-month period from the grant date. The per share value on the grant date was $0.18. The issuance was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering.
On January 11, 2021, we issued 312,500 shares to Whisper Advisors, LLC as payment for services provided pursuant to that certain Services Agreement dated December 22, 2020. The shares had a fair market value of $125,000. The issuance was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering.
Any other securities that we sold that were not registered under the Securities Act during the previous three years have previously been included in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Item 6. Selected Financial Data
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report includes the business and financial information for the Fiscal Year Period (i.e., the year ended December 31, 2020). Therefore, this Management’s Discussion and Analysis of Financial Condition and Results of Operations provides an analysis of the financial condition and results of operations for the Fiscal Year Period. The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Please see “Our Future Business” and “Future Liquidity” for additional important information.
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Overview
We operate a best-in-class technology platform empowering premium publishers who impact, inform, educate and entertain. We operate the media businesses for Sports Illustrated and TheStreet, and power more than 250 independent brands. The Maven Platform provides digital publishing, distribution and monetization capabilities to our own Sports Illustrated and TheStreet media businesses as well as to the Publisher Partners. Generally, the Publisher Partners are independently owned strategic partners who receive a share of revenue from the interaction with their content. They also benefit from our membership marketing and management systems to further enhance their revenue.
Our growth strategy is to continue to expand by adding new premium publishers with high quality brands and content either as independent Publisher Partners or by acquiring publishers as owned and operated entities. By adding premium content brands, we will further expand the scale of the Maven Platform, improve monetization effectiveness in both advertising and subscription revenues, and enhance the attractiveness to consumers and advertisers.
Liquidity and Capital Resources
As of December 31, 2020, our principal sources of liquidity consisted of cash of approximately $9.0 million. In addition, we had the use of additional proceeds from our working capital facility with FPP Finance LLC (“FastPay”), As of the issuance date of our consolidated financial statements for the year ended December 31, 2020, we had also received proceeds from a private placement of our common stock of approximately $20.0 million, which is discussed in greater detail below in the section entitled “Future Liquidity.”
We continued to be focused on growing our existing operations and seeking accretive and complementary strategic acquisitions as part of our growth strategy. We believed, that with additional sources of liquidity and the ability to raise additional capital or incur additional indebtedness to supplement our then internal projections, we would be able to execute our growth plan and finance our working capital requirements.
We have financed our working capital requirements since inception through issuances of equity securities and various debt financings. Our working capital deficit as of December 31, 2020 and 2019 was as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Current assets | $ | 73,846,465 | $ | 48,160,360 | ||||
| Current liabilities | (107,562,825 | ) | (87,541,031 | ) | ||||
| Working capital deficit | (33,716,360 | ) | (39,380,671 | ) | ||||
As of December 31, 2020, we had a working capital deficit of approximately $33.7 million, as compared to approximately $39.4 million as of December 31, 2019, consisting of approximately $73.8 million in total current assets and approximately $107.6 million in total current liabilities. Included in current assets as of December 31, 2020, was approximately $0.5 million of restricted cash. Also included in our working capital deficit is approximately $1.1 million of warrant derivative liabilities, leaving a working capital deficit that requires cash payments of approximately $32.6 million. We had a working capital deficit as of December 31, 2019, consisting of approximately $48.2 million in total current assets and approximately $87.5 million in total current liabilities.
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Our cash flows during the years ended December 31, 2020 and 2019 consisted of the following:
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Net cash used in operating activities | $ | (32,294,587 | ) | $ | (56,954,306 | ) | ||
| Net cash used in investing activities | (4,927,833 | ) | (19,019,191 | ) | ||||
| Net cash provided by financing activities | 37,284,011 | 82,919,298 | ||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | $ | 61,591 | $ | 6,945,801 | ||||
| Cash, cash equivalents, and restricted cash, end of year | $ | 9,534,681 | $ | 9,473,090 | ||||
For the year ended December 31, 2020, net cash used in operating activities was approximately $32.3 million, consisting primarily of: approximately $116.0 million of cash received from customers (including payments received in advance of performance obligations); less (i) approximately $148.3 million of cash paid (a) to employees, Publisher Partners, Expert Contributors, suppliers, and vendors, and (b) for revenue share arrangements and professional services; and (ii) approximately $0.6 million of cash paid for interest; as compared to the year ended December 31, 2019, where net cash used in operating activities was approximately $57.0 million, consisting primarily of: approximately $47.4 million of cash received from customers (including payments received in advance of performance obligations); less (y) approximately $104.4 million of cash paid (a) to employees, Publisher Partners, suppliers, and vendors, and (b) for revenue share arrangements, advance of royalty fees and professional services; and (z) approximately $2.9 million of cash paid for interest.
For the year ended December 31, 2020, net cash used in investing activities was approximately $4.9 million, consisting primarily of (i) approximately $0.3 million for the acquisition of a business; (ii) approximately $1.2 million for purchases of property and equipment; (iii) approximately $3.8 million for capitalized costs for our Maven Platform; and (iv) approximately $0.4 million from proceeds for the sale of intangible assets; as compared to the year ended December 31, 2019, where net cash used in investing activities was approximately $19.0 million, consisting primarily of (x) approximately $16.3 million for the acquisition of a business; (y) approximately $0.2 million for purchases of property and equipment; and (z) approximately $2.5 million for capitalized costs for our Maven Platform.
For the year ended December 31, 2020, net cash provided by financing activities was approximately $37.3 million, consisting primarily of: (i) approximately $20.6 million in net proceeds from the issuance of Series H Convertible Preferred Stock (the “Series H Preferred Stock”), Series J Convertible Preferred Stock (“Series J Preferred Stock”), and Series K Convertible Preferred Stock (“Series K Preferred Stock”); (ii) approximately $7.2 million in borrowings under our line of credit; (iii) approximately $11.1 million in net proceeds from long-term debt consisting of the 15% delayed draw term note (the “Term Note”) and the Paycheck Protection Program Loan issued under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”); less (iv) approximately $1.1 million in repayments under the 12% senior secured subordinated convertible debentures (referred to herein as the “12% convertible debentures”) (for additional information, see Note 18, Convertible Debt, in our accompanying consolidated financial statements); and (v) approximately $0.5 million in payments for tax withholdings on the net settlement of share awards; as compared to the year ended December 31, 2019, where net cash provided by financing activities was approximately $82.9 million, consisting primarily of: (i) approximately $36.1 million in net proceeds from the issuance of Series I Convertible Preferred Stock (“Series I Preferred Stock”) and Series J Preferred Stock; (ii) approximately $2.0 million in gross proceeds from the sale of the 12% convertible debentures; and (iii) approximately $46.5 million in net proceeds from the issuance of long-term debt (the “12% Amended Senior Secured Notes”), less repayments of other long-term debt; offset by (x) approximately $0.3 million in payments for tax withholdings on the net settlement of share awards; (y) approximately $1.0 million in repayments under our line of credit; and (z) approximately $0.4 million in the repayment of officer promissory notes.
During the year ended December 31, 2020, we received aggregate gross proceeds of approximately $20.8 million from the issuance of our Series H Preferred Stock, Series K Preferred Stock and Series J Preferred Stock (as further described in Note 20, Preferred Stock, in our accompanying consolidated financial statements). All of the shares of Series K Preferred Stock and Series J Preferred Stock automatically converted into shares of our common stock on or about December 18, 2020, the date on which we filed a Certificate of Amendment to our Restated Certificate of Incorporation, as amended (the “Certificate of Amendment”), to increase the number of authorized shares of our common stock to at least a number permitting such preferred stock shares to be converted in full. As of December 31, 2020, we had no shares of Series K or Series J Preferred Stock outstanding. For additional information, see Note 20, Preferred Stock, in our accompanying consolidated financial statements.
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Debt Financings
Net proceeds from our debt financings (see Note 14, Line of Credit, and Note 19, Long-term Debt, in our accompanying consolidated financial statements for additional information) consisted of the following:
FastPay Credit Facility. On February 6, 2020, we entered into a financing and security agreement with FastPay, pursuant to which FastPay extended a $15.0 million line of credit for working capital purposes secured by a first lien on all of our cash and accounts receivable and a second lien on all other assets. Borrowings under the facility bear interest at the LIBOR Rate plus 8.50% and have a final maturity of February 6, 2022. This line of credit was amended by that certain first amendment to financing and security agreement dated March 24, 2020 to permit us to amend and restate the 12% senior secured notes. The aggregate principal amount outstanding, plus accrued and unpaid interest, as of the issuance date of our accompanying consolidated financial statements for the year ended December 31, 2020 was approximately $6.5 million.
Amended and Restated 12% Senior Secured Notes. On February 27, 2020, we entered into a second amendment to the amended and restated note purchase agreement (the “Second Amendment to A&R NPA”), which further amended the amended and restated note purchase agreement, dated as of June 14, 2019 (the “A&R NPA”), with one accredited investor, BRF Finance Co., LLC (“BRF Finance”), an affiliated entity of B. Riley Financial, Inc. (“B. Riley”). The Second Amendment to A&R NPA further amended the amended and restated 12% senior secured note due June 14, 2022. Pursuant to the Second Amendment to A&R NPA, we replaced our previous $3.5 million working capital facility with Sallyport Commercial Finance, LLC with a new $15.0 million working capital facility with FastPay; and (ii) BRF Finance issued a letter of credit in the amount of approximately $3.0 million to our landlord for our lease of the premises located at 225 Liberty Street, 27th Floor, New York, New York 10281. All borrowings under the amended and restated 12% senior secured notes are collateralized by substantially all of our assets.
On March 24, 2020, we entered into a second amended and restated note purchase agreement (the “Second A&R NPA”) with BRF Finance, an affiliated entity of B. Riley, in its capacity as agent for the purchasers, which further amended and restated the Second Amendment to A&R NPA. Pursuant to the Second A&R NPA, interest on amounts outstanding under the existing 12% senior secured notes with respect to (i) interest that was payable on such notes on March 31, 2020 and June 30, 2020, and (ii) at our option, with the consent of requisite purchasers, interest that was payable on September 30, 2020 and December 31, 2020, in lieu of the payment in cash of all or any portion of the interest due on such dates, would be payable in-kind in arrears on the last day of such applicable fiscal quarter.
On October 23, 2020, we entered into Amendment No. 1 to the Second A&R NPA with BRF Finance (“Amendment 1”), pursuant to which the maturity date of the 12% senior secured notes was changed to December 31, 2022 or an earlier date if the obligations have been accelerated pursuant to and in accordance with the terms of Amendment 1. Pursuant to Amendment 1, interest payable on the existing 12% senior secured notes on September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts originally could have been paid in shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of common stock, all such interest amounts can be paid in shares of our common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments.
On May 19, 2021, we entered into an amendment to the Second A&R NPA (“Amendment 2”) with BRF Finance, an affiliated entity of B. Riley, in its capacity as agent for the purchasers and as purchaser, which further amended the 12% senior secured notes. Pursuant to Amendment 2: (i) the interest rate on the 12% senior secured notes decreased from a rate of 12% per annum to a rate of 10% per annum; (ii) the interest rate on the Term Note decreased from a rate of 15% per annum to a rate of 10% per annum; and (iii) we agreed that within one (1) business day after receipt of cash proceeds from any issuance of equity interests, we would prepay the certain obligations in an amount equal to such cash proceeds, net of underwriting discounts and commissions; provided, that, this mandatory prepayment obligation did not apply to any proceeds that we received from the sale and issuance of shares of our common stock pursuant to the securities purchase agreement during the 90-day period commencing on May 20, 2021.
The balance outstanding under our amended and restated 12% senior secured notes as of the issuance date of our consolidated financial statements for the year ended December 31, 2020 was $59.6 million, which included outstanding principal of approximately $48.8 million, payment of in-kind interest of approximately $7.5 million that we were permitted to add to the aggregate outstanding principal balance, and unpaid accrued interest of approximately $0.4 million).
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Delayed Draw Term Note. Pursuant to the Second A&R NPA, we agreed to issue, at BRF Finance’s option, the Term Note, in the aggregate principal amount of $12.0 million to the investor. On March 24, 2020, we drew down approximately $6.9 million under the Term Note, and after payment of commitment and funding fees paid to BRF Finance in the amount of approximately $0.7 million, and other of its legal fees and expenses that we incurred, we received net proceeds of $6.0 million. The net proceeds were used by us for working capital and general corporate purposes. Additional borrowings under the Term Note requested by us may be made at the option of the purchasers. Up to $8.0 million in principal amount under the Term Note was originally due on March 31, 2021. Interest on amounts outstanding under the Term Note was payable in-kind in arrears on the last day of each fiscal quarter.
Pursuant to the terms of Amendment 1, the maturity date was changed from March 31, 2021 to March 31, 2022. Amendment 1 also provided that BRF Finance, as holder, could originally elect, in lieu of receipt of cash for payment of all or any portion of the interest due or cash payments up to the Conversion Portion (as defined in Amendment 1) of the Term Note, to receive shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of our common stock, the holder may elect, in lieu of receipt of cash for such amounts, shares of our common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments.
On October 23, 2020, approximately $3.4 million, including approximately $3.3 million of principal amount of the Term Note and approximately $0.7 million of accrued interest, had been converted into shares of our Series K Preferred Stock. The aggregate principal amount outstanding under the Term Note as of the issuance date of our consolidated financial statements for the year ended December 31, 2020 was approximately $4.7 million (including payment of in-kind interest of approximately $1.1 million, which was added to the outstanding Term Note balance).
Pursuant to the terms of Amendment 2, the interest rate on the Term Note decreased from a rate of 15% per annum to a rate of 10% per annum.
Paycheck Protection Program Loan. On April 6, 2020, we issued a note in favor of JPMorgan Chase Bank, N.A., pursuant to the recently enacted CARES Act administered by the U.S. Small Business Administration (“SBA”). We received total proceeds of approximately $5.7 million under the note. In accordance with the requirements of the CARES Act, we used the proceeds from the note primarily for payroll costs. The note was scheduled to mature on April 6, 2022, had a 0.98% interest rate and was subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The balance outstanding as of December 31, 2020 was approximately $5.7 million.
Pursuant to the CARES Act, the note was eligible for partial forgiveness for the principal amounts that were used for the limited purposes that qualified for forgiveness under SBA requirements. In order to obtain forgiveness, we requested such forgiveness, provided the requisite documentation in accordance with the SBA requirements, and certified that the amounts we were requesting to be forgiven qualified under those requirements. On June 22, 2021, we received notification from the SBA that our loan was fully forgiven.
12% Convertible Debentures. On December 31, 2020, noteholders converted the 12% convertible debentures representing an aggregate of approximately $18.1 million of the then-outstanding principal and accrued but unpaid interest into 53,887,470 shares of our common stock at effective conversion per-share prices ranging from $0.33 to $0.40. Despite the terms of the 12% convertible debentures, the noteholders agreed to allow us to repay accrued but unpaid interest in shares of our common stock. The remaining 12% convertible debentures representing an aggregate of approximately $1.1 million of outstanding principal and accrued interest were not converted and, instead, such amounts were repaid in cash to the noteholders.
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Future Liquidity
Our consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We had revenues of approximately $128.0 million during fiscal 2020 and have experienced recurring net losses from operations and negative operating cash flows. Consequently, we were dependent upon continued access to funding and capital resources from both new investors and related parties. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our growth plan and plan of operations. These financings may include terms that may be highly dilutive to existing stockholders.
From January 1, 2021 to the issuance date of our accompanying consolidated financial statements for the year ended December 31, 2020, we continued to incur operating losses and negative cash flow from operating and investing activities. We have raised $20.0 million in net proceeds pursuant to the sale of shares of our common stock. Our cash balance as of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued was approximately $13.9 million. Net proceeds from issuances of our common stock (as further described in Note 27, Subsequent Events, in our accompanying consolidated financial statements) consisted of the following:
On May 20 and 25, 2021, we entered into securities purchase agreements with several accredited investors, pursuant to which we sold an aggregate of 21,435,718 shares of our common stock, at a per share price of $0.70, for aggregate gross proceeds of approximately $15.0 million in a private placement. On June 2, 2021, we entered into a securities purchase agreement with an accredited investor, pursuant to which we sold an aggregate of 7,142,857 shares of our common stock, at a per share price of $0.70, for gross proceeds of approximately $5.0 million in a private placement that was in addition to the two earlier closing that occurred on May 20 and 25, 2021. We intend to use the proceeds for general corporate purposes.
Going Concern
We performed an annual reporting period going concern assessment. Management is required to assess our ability to continue as a going concern. This Annual Report has been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
We have had a history of recurring losses. Our recurring losses from operations and net capital deficiency have been evaluated by management to determine if the significance of those conditions or events would limit our ability to meet its obligations when due. The operating loss realized in fiscal 2020 was primarily a result of the impact on our business from the COVID-19 pandemic and the related shut down of most professional and collegiate sports, which reduced user traffic and advertising revenue. The operating loss realized in fiscal 2019 was primarily a result of a marketing investment in customer growth, together with investment in people and technology as we continued to expand our operations, and operations rapidly expanding during fiscal 2019 with the TheStreet Merger and the Sports Illustrated Licensing Agreement.
As reflected in our accompanying consolidated financial statements, we had revenues of approximately $128.0 million for the year ended December 31, 2020, and have experienced recurring net losses from operations, negative working capital and negative operating cash flows. During the year ended December 31, 2020, we incurred a net loss attributable to common stockholders of approximately $104.7 million, utilized cash in operating activities of approximately $32.3 million, and as of December 31, 2020, had an accumulated deficit of approximately $162.1 million. We have financed our working capital requirements since inception through the issuance of debt and equity securities.
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The negative impact from the COVID-19 pandemic during 2021 has been to a lesser extent than in 2020. Beginning in 2021, restrictions on non-essential work activity have begun to lift and sporting and other events have begun to be held, with attendance closer to pre-pandemic levels, which has resulted in an increase in traffic to the Maven Platform and, thereby an increase in advertising revenue. The ultimate extent of the impact on our operational and financial performance will depend on future developments, including the duration and spread of the COVID-19 pandemic, whether related group gathering and sports event advisories and restrictions will be put in place again, and the extent and effectiveness of containment and other actions taken, including the percentage of the population that receives COVID-19 vaccinations, all of which remain uncertain at the time of issuance of our accompanying consolidated financial statements.
Management has evaluated whether relevant conditions or events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern. Substantial doubt exists when conditions and events, considered in the aggregate, indicate it is probable that a company will not be able to meet its obligations as they become due within one year after the issuance date of its financial statements. Management’s assessment is based on the relevant conditions that are known or reasonably knowable as of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued.
Management’s assessment of our ability to meet our future obligations is inherently judgmental, subjective and susceptible to change. The factors that we considered important in its going concern analysis, include, but are not limited to, our fiscal 2021 cash flow forecast and our fiscal 2021 operating budget. Management also considered our implementation of additional measures, if required, related to potential revenue and earnings declines from COVID-19. These factors consider information including, but not limited to, our financial condition, liquidity sources, obligations due within one year after the issuance date of our accompanying consolidated financial statements, the funds necessary to maintain operations and financial conditions, including negative financial trends or other indicators of possible financial difficulty.
In particular, our plan for the: (1) 2021 cash flow forecast, considered the use of our working capital line with FastPay (as described in Note 19, Long-term Debt, in our accompanying consolidated financial statements) to fund changes in working capital, under which we have available credit of approximately $8.5 million as of the issuance date of these consolidated financial statements for the year ended December 31, 2020, and that we do not anticipate the need for any further borrowings that are subject to the approval of the holders of the Term Note (as described in Note 19, Long-term Debt, in our accompanying consolidated financial statements), under which we may be permitted to borrow up to an additional $5 million; and (2) 2021 operating budget, considered that approximately fifty-eight percent of our revenue is from recurring subscriptions, generally paid in advance, and that digital subscription revenue, that accounts for approximately thirty percent of subscription revenue, grew approximately thirty percent in 2020 demonstrating the strength of our premium brand, and the plan to continue to grow our subscription revenue from our acquisition of TheStreet in 2019 (as described in Note 3, Acquisitions, in our accompanying consolidated financial statements) and to grow premium digital subscriptions from our Sports Illustrated Licensed Brands (as described in Note 3, Acquisitions, in our accompanying consolidated financial statements), which were launched in February 2021.
We have considered both quantitative and qualitative factors as part of the assessment that are known or reasonably knowable as of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued, and concluded that conditions and events considered in the aggregate, do not raise substantial doubt about our ability to continue as a going concern for a one-year period following the financial statement issuance date.
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Results of Operations
Comparison of Fiscal 2020 to Fiscal 2019
| Years Ended December 31, | 2020 versus 2019 | |||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Revenue | $ | 128,032,397 | $ | 53,343,310 | $ | 74,689,087 | 140.0 | % | ||||||||
| Cost of revenue | 103,063,445 | 47,301,175 | 55,762,270 | 117.9 | % | |||||||||||
| Gross profit (loss) | 24,968,952 | 6,042,135 | 18,926,817 | 313.2 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing | 43,589,239 | 12,789,056 | 30,800,183 | 240.8 | % | |||||||||||
| General and administrative | 36,007,238 | 29,511,204 | 6,496,034 | 22.0 | % | |||||||||||
| Depreciation and amortization | 16,280,475 | 4,551,372 | 11,729,103 | 257.7 | % | |||||||||||
| Total operating expenses | 95,876,952 | 46,851,632 | 49,025,320 | 104.6 | % | |||||||||||
| Loss from operations | (70,908,000 | ) | (40,809,497 | ) | (30,098,503 | ) | 73.8 | % | ||||||||
| Total other (expenses) income | (18,113,131 | ) | (17,232,999 | ) | (880,132 | ) | 5.1 | % | ||||||||
| Loss before income taxes | (89,021,131 | ) | (58,042,496 | ) | (30,978,635 | ) | 53.4 | % | ||||||||
| Income taxes | (210,832 | ) | 19,541,127 | (19,751,959 | ) | -100.1 | % | |||||||||
| Net loss | (89,231,963 | ) | (38,501,369 | ) | (50,730,594 | ) | 131.8 | % | ||||||||
| Deemed dividend on convertible preferred stock | (15,642,595 | ) | - | (15,642,595 | ) | 0.0 | % | |||||||||
| Net loss attributable to common stockholders | $ | (104,874,558 | ) | $ | (38,501,369 | ) | $ | (66,373,189 | ) | 172.4 | % | |||||
| Basic and diluted net loss per common share | $ | (2.28 | ) | $ | (1.04 | ) | $ | (1.22 | ) | 119.2 | % | |||||
| Weighted average number of shares outstanding – basic and diluted | 45,981,029 | 37,080,784 | 8,900,245 | 24.0 | % | |||||||||||
For the year ended December 31, 2020, the net loss attributable to common shareholders was approximately $104.9 million. The total net loss attributable to common stockholders increased by approximately $66.4 million from the year ended December 31, 2019 net loss of approximately $38.5 million. The primary reasons for the increase in the total net loss is that our operations continued to rapidly expand during the year ended December 31, 2020 as they did in 2019. In particular, during the year ended December 31, 2020 we operated our Sports Illustrated media business that we acquired during the fourth quarter of 2019. The basic and diluted net loss per common share for the year ended December 31, 2020 of $2.28 increased from $1.04 for the year ended December 31, 2019 primarily because of: (i) the weighted average basic and diluted shares increased as the net loss per common share increased along with the calculation of the daily weighted average shares outstanding increase to 45,981,029 shares from 37,080,784 shares; (ii) the deemed dividend on the convertible preferred stock of approximately $15.6 million; and (iii) the other expenses of approximately $18.1 million.
Our growth strategy is principally focused on adding new publisher partners to our Maven Platform. In addition, if the right opportunity exists, we may also acquire related online media, publishing, and technology businesses. This combined growth strategy has expanded the scale of unique users interacting on our Maven Platform with increased revenues during 2020. We expect revenues increases in subsequent years will come from organic growth in operations, addition of more publisher partners, and mergers and acquisitions.
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Revenue
The following table sets forth revenue, cost of revenue, and gross profit:
| Years Ended December 31, | 2020 versus 2019 | |||||||||||||||||||||||
| 2020 | 2019 | Change | % Change | |||||||||||||||||||||
| (percentage reflect cost of revenue as a percentage of total revenue) | ||||||||||||||||||||||||
| Revenue | $ | 128,032,397 | 100.0 | % | $ | 53,343,310 | 100.0 | % | $ | 74,689,087 | 140.0 | % | ||||||||||||
| Cost of revenue | 103,063,445 | 80.5 | % | 47,301,175 | 88.7 | % | 55,762,270 | 117.9 | % | |||||||||||||||
| Gross profit | $ | 24,968,952 | 19.5 | % | $ | 6,042,135 | 11.3 | % | $ | 18,926,817 | 313.2 | % | ||||||||||||
For the year ended December 31, 2020, we had gross profit of approximately $25.0 million, as compared to gross profit of approximately $6.0 million for year ended December 31, 2019.
The following table sets forth revenue by product line and the corresponding percent of total revenue:
| Years Ended December 31, | 2020 versus 2019 | |||||||||||||||||||||||
| 2020 | 2019 | Change | % Change | |||||||||||||||||||||
| (percentages reflect product line as a percentage of total revenue) | ||||||||||||||||||||||||
| Advertising | $ | 44,359,822 | 34.6 | % | $ | 35,918,370 | 67.3 | % | $ | 8,441,452 | 15.8 | % | ||||||||||||
| Digital subscriptions | 28,495,676 | 22.3 | % | 6,855,038 | 12.9 | % | 21,640,638 | 40.6 | % | |||||||||||||||
| Magazine circulation | 50,580,213 | 39.5 | % | 9,046,473 | 17.0 | % | 41,533,740 | 77.9 | % | |||||||||||||||
| Other | 4,596,686 | 3.6 | % | 1,523,429 | 2.9 | % | 3,073,257 | 5.8 | % | |||||||||||||||
| Total revenue | $ | 128,032,397 | 100.0 | % | $ | 53,343,310 | 100.0 | % | $ | 74,689,087 | 140.0 | % | ||||||||||||
For the year ended December 31, 2020, the primary sources of revenue were as follows: (i) advertising of approximately $44.4 million; (ii) digital subscriptions of approximately $28.5 million; (iii) magazine circulation of approximately $50.6 million; and (iv) other revenue of approximately $4.6 million. Our advertising revenue increased by approximately $8.4 million, due to additional revenue of approximately $3.2 million generated as a result of TheStreet, which we acquired during the second quarter of 2019, and approximately $11.5 million generated as a result of the Sports Illustrated media business, which we acquired during the fourth quarter of 2019, offset by an approximately $6.2 million decrease in revenue from our legacy business. Our digital subscriptions increased by approximately $21.6 million due to additional revenue of approximately $16.8 million generated as a result of TheStreet, which we acquired during the second quarter of 2019 and approximately $4.3 million generated as a result of the Sports Illustrated media business, which we acquired during the fourth quarter of 2019. Our magazine circulation contributed approximately $41.5 million as a result of the Sports Illustrated media business acquired during the fourth quarter of 2019. Our other revenue increased by approximately $3.1 million due to additional revenue of approximately $0.3 million generated as a result of TheStreet, which we acquired during the second quarter of 2019, approximately $0.4 million generated as a result of the Sports Illustrated media business, which we acquired during the fourth quarter of 2019, and approximately $2.3 million generated by our legacy business.
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Cost of Revenue
For the years ended December 31, 2020 and 2019, we recognized cost of revenue of approximately $103.1 million and approximately $47.3 million, respectively. The increase of approximately $55.8 million in cost of revenue is primarily from: (i) our Publisher Partner guarantees and revenue share payments of approximately $4.8 million; (ii) payroll, stock based compensation, and related expenses for customer support, technology maintenance, and occupancy costs of related personnel of approximately $19.1 million; (iii) amortization of our Maven Platform of approximately $2.4 million (which includes our Maven Platform spending and amortization related to acquired developed technology from our acquisitions); (iv) royalty fees of approximately $11.3 million; (v) hosting, bandwidth, and software licensing fees of approximately $1.3 million; (vi) printing, distribution, and fulfillment costs of approximately $9.5 million; (vii) fees paid for data analytics and to other outside services providers of approximately $3.7 million and (vii) other costs of revenue of approximately $3.8 million.
For the year ended December 31, 2020, we capitalized costs related to our Maven Platform of approximately $5.4 million, as compared to approximately $3.8 million for the year ended December 31, 2019. In fiscal 2020, the capitalization of our Maven Platform development consisted of approximately $3.8 million in payroll and related expenses, including taxes and benefits, approximately $1.6 million in stock-based compensation for related personnel, and amortization of approximately $8.6 million. In fiscal 2019, the capitalization of our Maven Platform development consisted of approximately $2.5 million in payroll and related expenses, including taxes and benefits, approximately $1.3 million in stock-based compensation for related personnel, and amortization of approximately $6.2 million.
Operating Expenses
The following table sets forth operating expenses and the corresponding percentage of total revenue:
| Years Ended December 31, | 2020 versus 2019 | |||||||||||||||||||||||
| 2020 | 2019 | Change | % Change | |||||||||||||||||||||
| (percentages reflect expense as a percentage of total revenue) | ||||||||||||||||||||||||
| Selling and marketing | $ | 43,589,239 | 34.0 | % | $ | 12,789,056 | 24.0 | % | $ | 30,800,183 | 65.7 | % | ||||||||||||
| General and administrative | 36,007,238 | 28.1 | % | 29,511,204 | 55.3 | % | 6,496,034 | 13.9 | % | |||||||||||||||
| Depreciation and amortization | 16,280,475 | 12.7 | % | 4,551,372 | 8.5 | % | 11,729,103 | 25.0 | % | |||||||||||||||
| Total operating expenses | $ | 95,876,952 | $ | 46,851,632 | $ | 49,025,320 | 104.6 | % | ||||||||||||||||
Selling and Marketing. For the year ended December 31, 2020, we incurred selling and marketing costs of approximately $43.6 million, as compared to approximately $12.8 million for the year ended December 31, 2019. The increase in selling and marketing cost of approximately $30.8 million is primarily from payroll costs for the selling and marketing account management support teams, along with the related benefits and stock based compensation of approximately $8.2 million; circulation costs of approximately $14.2 million; office and occupancy costs of approximately $0.7 million; advertising costs of approximately $5.9 million; and other selling and marketing related costs of approximately $1.7 million.
General and Administrative. For the year ended December 31, 2020, we incurred general and administrative costs of approximately $36.0 million from payroll and related expenses, professional services, occupancy costs, stock based compensation of related personnel, depreciation and amortization, and other corporate expense, as compared to approximately $29.5 million for the year ended December 31, 2019. The increase in general and administrative expenses of approximately $6.5 million is primarily from our increase in professional services, including accounting, legal and insurance of approximately $4.8 million; facilities costs of approximately $1.1 million; and other general corporate expenses of approximately $2.0 million.
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Other (Expenses) Income
The following table sets forth other (expenses) income:
| Years Ended December 31, | 2020 versus 2019 | |||||||||||||||||||||||
| 2020 | 2019 | Change | % Change | |||||||||||||||||||||
| (percentages reflect other expense (income) as a percentage of the total) | ||||||||||||||||||||||||
| Change in valuation of warrant derivative liabilities | $ | 496,305 | -2.7 | % | $ | (1,015,151 | ) | 5.9 | % | $ | 1,511,456 | -8.8 | % | |||||||||||
| Change in valuation of embedded derivative liabilities | 2,571,004 | -14.2 | % | (5,040,000 | ) | 29.2 | % | 7,611,004 | -44.2 | % | ||||||||||||||
| Loss on conversion of convertible debentures | (3,297,539 | ) | 18.2 | % | - | 0.0 | % | (3,297,539 | ) | 19.1 | % | |||||||||||||
| Interest expense | (16,497,217 | ) | 91.1 | % | (10,463,570 | ) | 60.7 | % | (6,033,647 | ) | 35.0 | % | ||||||||||||
| Interest income | 381,026 | -2.1 | % | 13,976 | -0.1 | % | 367,050 | -2.1 | % | |||||||||||||||
| Liquidated damages | (1,487,577 | ) | 8.2 | % | (728,516 | ) | 4.2 | % | (759,061 | ) | 4.4 | % | ||||||||||||
| Other (expense) income | (279,133 | ) | 1.5 | % | 262 | 0.0 | % | (279,396 | ) | 1.6 | % | |||||||||||||
| Total other expenses | $ | (18,113,131 | ) | 100.0 | % | $ | (17,232,999 | ) | 100.0 | % | $ | (880,132 | ) | 5.1 | % | |||||||||
Change in Valuation of Warrant Derivative Liabilities. The change in valuation of warrant derivative liabilities for the year ended December 31, 2020 was the result of the decrease in the fair value of the warrant derivative liabilities as of December 31, 2020, as compared to the change in the valuation for the year ended December 31, 2019 where the change was from an increase in the fair value of the warrant derivative liabilities as of December 31, 2019.
Change in Valuation of Embedded Derivative Liabilities. The change in valuation of embedded derivative liabilities for the year ended December 31, 2020 was the result of the decrease in the fair value of the embedded derivative liabilities as of December 31, 2020, as compared to the change in the valuation for the year ended December 31, 2019 where the change was from an increase in the fair value of the embedded derivative liabilities as of December 31, 2019.
Interest Expense. We incurred interest expense of approximately $16.5 million during the year ended December 31, 2020, as compared to approximately $10.5 million for the year ended December 31, 2019, primarily consisting of approximately $6.6 million from amortization of debt discount on notes payable; approximately $9.2 million of accrued interest; and approximately $0.6 million of other interest. In fiscal 2019, interest expense primarily consisted of approximately $4.5 million of amortization of accretion of original issue discount and debt discount on notes payable; $3.1 million of accrued interest; and $2.9 million of other interest.
Liquidated Damages. We recorded approximately $1.5 million of liquidating damages, including the accrued interest thereon, during the year ended December 31, 2020 primarily from the issuance of our 12% convertible debentures, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock in fiscal 2020 since we determined that: (1) the registration statements registering for resale the shares of common stock issuable upon conversion of the 12% convertible debentures, Series I Preferred Stock and Series J Preferred Stock would not be declared effective within the requisite time frame; and (2) that we would not be able to become current in our periodic filing obligations with the SEC in order to satisfy the public information requirements under the applicable securities purchase agreements. We recorded liquidated damages, including the accrued interest thereon, of approximately $0.7 million in fiscal 2019 primarily from issuance of our 12% convertible debentures, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock, which liquidated damages were based upon the reasons set forth above.
Deemed Dividend on Convertible Preferred Stock
Series H Preferred Stock. During fiscal 2020, in connection with the issuance of 108 shares (issued on August 19, 2020) and 389 shares (issued on October 31, 2020) of our Series H Preferred Stock, we recorded a beneficial conversion feature of approximately $0.1 million and approximately $0.4 million, respectively (totaling approximately $0.7 million), for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.33 was lower than our common stock trading price of $0.86 and $0.77 at the issuance dates of August 19, 2020 and October 31, 2020, respectively). The beneficial conversion feature was recognized as a deemed dividend.
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Series I Preferred Stock. On December 18, 2020, all of the shares of our Series I Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.50 was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.
Series J Preferred Stock. On December 18, 2020, all of the shares of our Series J Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the effective conversion price of $0.40 for the issuance of our Series J Preferred Stock on September 4, 2020 (these shares were issued at a discount) was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.
Series K Preferred Stock. On December 18, 2020, all of the shares of our Series K Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.40 was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.
Seasonality
We expect to experience typical media company advertising and membership sales seasonality, which is strong in the fiscal fourth quarter and slower in the fiscal first quarter.
Effects of Inflation
To date inflation has not had a material impact on our business or operating results.
Our Future Business
In 2021, we completed the following acquisition:
Acquisition of The Spun
On June 4, 2021, we entered into the CS Purchase Agreement with Maven Media, The Spun, the Seller Parties, and the representative, pursuant to which, on the same date, Maven Media acquired The Spun Stock. In exchange for The Spun Stock, Maven Media agreed to pay a purchase price, comprised of the Cash Payment of an aggregate of $11 million and the Stock Payment consisting of an aggregate of 4,285,714 restricted shares of our common stock, with one-half of the shares vesting on the first anniversary of the closing date and the remaining one-half of the shares vesting on the second anniversary of the closing date. The Cash Payment will be paid as follows: (i) on the closing date, a cash payment of $10 million; (ii) on the first anniversary of the closing date, a cash payment of $500,000; and (iii) on the second anniversary of the closing date, a cash payment of $500,000. The Cash Payment is subject to a customary working capital adjustment based on cash and accounts receivable targets of The Spun as of the closing. Further, the vesting of the Stock Payment held by Seller Parties is subject to the continued employment of certain senior executives of The Spun.
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, platform development, impairment of long-lived assets, and stock-based compensation. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2, Summary of Significant Accounting Policies, in our accompanying consolidated financial statements.
Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements included elsewhere in this Report, which have been prepared in accordance with GAAP. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Revenue
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of its revenue from contracts with customers. We account for revenue on a gross basis, as compared to a net basis, in its statement of operations. We made this determination based on it taking the credit risk in its revenue-generating transactions and it also being the primary obligor responsible for providing the services to the customer. Cost of revenues is presented as a separate line item in the statement of operations.
The following is a description of the principal activities from which we generate revenue:
Advertising Revenue
Digital Advertising. We recognize revenue from digital advertisements at the point when each ad is viewed. The quantity of advertisements, the impression bid prices, and revenue are reported on a real-time basis. We enter into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with its various channels. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. We owe our independent Publisher Partners a revenue share of the advertising revenue earned, which is recorded as service costs in the same period in which the associated advertising revenue is recognized.
Advertising revenue that is comprised of fees charged for the placement of advertising on the websites that we own and operate, is recognized as the advertising or sponsorship is displayed, provided that collection of the resulting receivable is reasonably assured.
Print Advertising. Advertising related revenues for print advertisements are recognized when advertisements are published (defined as an issue’s on-sale date), net of provisions for estimated rebates, rate adjustments, and discounts.
Subscription Revenue
Digital Subscriptions. We enter into contracts with internet users that subscribe to premium content on our owned and operated media channels and facilitate such contracts between internet users and our Publisher Partners. These contracts provide internet users with a membership subscription to access the premium content. For subscription revenue generated by our independent Publisher Partners’ content, we owe our Publisher Partners a revenue share of the membership subscription revenue earned, which is initially deferred and recorded as deferred contract costs. We recognize deferred contract costs over the membership subscription term in the same pattern that the associated membership subscription revenue is recognized.
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Digital subscription revenue generated from our websites that we own and operate are charged to customers’ credit cards or are directly billed to corporate subscribers, and are generally billed in advance on a monthly, quarterly or annual basis. We calculate net subscription revenue by deducting from gross revenue an estimate of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue is recognized ratably over the subscription periods. Unearned revenue relates to payments for subscription fees for which revenue has not been recognized because services have not yet been provided.
Circulation Revenue
Circulation revenues include magazine subscriptions and single copy sales at newsstands.
Print Subscriptions. Revenue from magazine subscriptions are deferred and recognized proportionately as products are distributed to subscribers.
Newsstand. Single copy revenue is recognized on the publication’s on-sale date, net of provisions for estimated returns. We base our estimates for returns on historical experience and current marketplace conditions.
Licensing Revenue
Content licensing-based revenues are accrued generally monthly or quarterly based on the specific mechanisms of each contract. Generally, revenues are accrued based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically recorded within three months of the initial estimates and have not been material. Any minimum guarantees are typically earned evenly over the fiscal year.
Contract Modifications
We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:
| ● | if the additional services and goods are distinct from the services and goods in the original arrangement; and |
| ● | if the amount of consideration expected for the added services or goods reflects the stand-alone selling price of those services and goods. |
A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulative catch-up basis.
Cost of Revenue
Our cost of revenue represents the cost of providing our digital media network channels and advertising and membership services. The cost of revenue that we have incurred in the periods presented primarily include:
| ● | Publisher Partner guarantees and revenue share payments; | |
| ● | amortization of developed technology and platform development; | |
| ● | royalty fees; | |
| ● | hosting, bandwidth and software license fees; | |
| ● | printing, distribution, and fulfillment costs; | |
| ● | payroll and related expenses for customer support, technology maintenance, and occupancy costs of related personnel; | |
| ● | fees paid for data analytics and to other outside service providers; and | |
| ● | stock-based compensation of related personnel. |
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Platform Development
For the years presented, substantially all of our technology expenses are development costs for the Maven Platform that were capitalized as intangible costs. Technology costs are expensed as incurred or capitalized into property and equipment in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other. This ASC requires that costs incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized.
We capitalize internal labor costs, including compensation, benefits and payroll taxes, incurred for certain capitalized platform development projects. Our policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material. Maven Platform development capitalized during the application development stage of a project include:
| ● | payroll and related expenses for personnel; and | |
| ● | stock-based compensation of related personnel. |
Selling and Marketing
Selling and marketing consist primarily of expenses incurred in selling and marketing our products. Our selling and marketing expenses include:
| ● | payroll and employee benefits of selling and marketing account management support teams; | |
| ● | professional marketing services; | |
| ● | office and occupancy costs; | |
| ● | circulation costs; | |
| ● | advertising costs; and | |
| ● | stock-based compensation of related personnel. |
General and Administrative
General and administrative expenses consist primarily of:
| ● | payroll and employee benefits for executive and administrative personnel; | |
| ● | professional services, including accounting, legal and insurance; | |
| ● | office and occupancy costs; | |
| ● | conferences; | |
| ● | other general corporate expenses; and | |
| ● | stock-based compensation of related personnel. |
Leases
We have various lease arrangements for certain equipment and its offices. Leases are recorded as an operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. At inception, we determine whether an arrangement that provides control over the use of an asset is a lease. When it is reasonably certain that we will exercise the renewal period, we include the impact of the renewal in the lease term for purposes of determining total future lease payments. Rent expense is recognized on a straight-line basis over the lease term.
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In February 2016, FASB issued Accounting Standards Update (“ASU”) ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior GAAP. We adopted ASU 2016-02 on January 1, 2019 which resulted in the recognition of right-of-use assets of approximately $1.7 million, lease liabilities for operating leases of approximately $1.8 million, with no cumulative effect adjustment on retained earnings on our consolidated balance sheets, with no material impact to our consolidated statements of (as further described in Note 7, Leases, in our accompanying consolidated financial statements).
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets of businesses acquired in a business combination. Goodwill is not amortized but rather is tested for impairment at least annually on December 31, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. We adopted ASU 2017-04 (as further described in Note 2, Summary of Significant Accounting Policies, in our accompanying consolidated financial statements) during the first quarter of 2020 which eliminated Step 2 from the goodwill impairment test. We operate as one reporting unit, therefore, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the Company to its carrying value. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of its single reporting unit is less than its carrying amount as a basis of determining whether it is necessary to perform the quantitative goodwill impairment test. If we determine that it is more likely than not that its fair value is less than its carrying amount, then the quantitative goodwill impairment test will be performed. The quantitative goodwill impairment test identifies goodwill impairment and measures the amount of goodwill impairment loss to be recognized by comparing the fair value of our single reporting unit with its carrying amount. If the fair value exceeds the carrying amount, no further analysis is required; otherwise, any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value.
Stock-Based Compensation
We provide stock-based compensation in the form of (a) stock awards to employees and directors, comprised of restricted stock awards and restricted stock units, (b) stock option grants to employees, directors and consultants, (c) common stock warrants to Publisher Partners (as further described in Note 22, Stock-Based Compensation, in our accompanying consolidated financial statements), and (d) common stock warrants to ABG (as further described in Note 22, Stock-Based Compensation, in our accompanying consolidated financial statements).
We account for stock awards and stock option grants to employees, directors, and consultants by measuring the cost of services received in exchange for the stock-based payments as compensation expense in our consolidated financial statements. Stock awards and stock option grants to employees which are time-vested are measured at fair value on the grant date, and charged to operations ratably over the vesting period. Stock awards and stock option grants to employees which are performance-vested are measured at fair value on the grant date and charged to operations when the performance condition is satisfied.
Prior to the adoption of ASU 2018-07 (as further described in Note 22, Stock-Based Compensation, in our accompanying consolidated financial statements), we accounted for stock-based payments to certain directors and consultants, and Publisher Partners (collectively the “non-employee awards”) by determining the value of the stock compensation based upon the measurement date at either (a) the date at which a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete, resulting in financial reporting period adjustments to stock-based compensation during the vesting terms for changes in the fair value of the awards. After adoption of ASU 2018-07, the measurement date for non-employee awards is the later of the adoption date of ASU 2018-07, or the date of grant, without change in the fair value of the award. There was no cumulative effect of adoption of ASU 2018-07 on January 1, 2019. For stock-based awards granted to non-employees subject to graded vesting that only contain service conditions, we have elected to recognize stock-based compensation expense using the straight-line recognition method.
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The fair value measurement of equity awards and grants used for stock-based compensation is as follows: (1) restricted stock awards and restricted stock units which are time-vested are determined using the quoted market price of the Company’s common stock at the grant date; (2) stock option grants which are time-vested and performance-vested are determined utilizing the Black-Scholes option-pricing model at the grant date; (3) restricted stock awards which provide for performance-vesting and a true-up provision are determined through consultants with our independent valuation firm using the binomial pricing model at the grant date; (4) stock option grants which provide for market-based vesting with a time-vesting overlay are determined through consultants with our independent valuation firm using the Monte Carlo model at the grant date; (5) Publisher Partner Warrants are determined utilizing the Black-Scholes option-pricing model; and (6) ABG Warrants are determined utilizing the Monte Carlo model (as further described in Note 22, Stock-Based Compensation, in our accompanying consolidated financial statements).
Fair value determined under the Black-Scholes option-pricing model and Monte Carlo model is affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option or warrants, as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the equity award. Estimated volatility is based on the historical volatility of our common stock and is evaluated based upon market comparisons. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of common stock is determined by reference to the quoted market price of our common stock.
The fair value of the stock options granted were probability weighted effective January 1, 2019 under the Black-Scholes option-pricing model or Monte Carlo model as determined through consultants with our independent valuation firm since the value of the units or options, among other things, depend on the volatility of the underlying shares of our common stock, under the following two scenarios: (1) scenario one assumes that our common stock will be up-listed on a national stock exchange (the “Exchange”) on a certain listing date (the “Up-list Date”); and (2) scenario two assumes that our common stock is not up-listed on the Exchange prior to the final vesting date of the grants (the “No Up-list”), collectively referred to as the “Probability Weighted Scenarios”.
We classify stock-based compensation expense in our consolidated statements of operations in the same manner in which the award recipient’s cash compensation costs are classified.
Income Taxes
We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date.
Impairment of Long-Lived Assets
We periodically evaluate the carrying value of long-lived assets to be held and used when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily by reference to the anticipated cash flows discounted at a rate commensurate with the risk involved.
Recently Issued Accounting Pronouncements
Note 2, Summary of Significant Accounting Policies, in our accompanying consolidated financial statements appearing elsewhere in this Annual Report includes Recently Issued Accounting Pronouncements.
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Off-Balance Sheet Arrangements
As of December 31, 2020, the following transactions, obligations or relationships represent our off-balance sheet arrangements:
Strome Warrants. On June 15, 2018, we modified the two securities purchase agreements dated January 4, 2018 and March 30, 2018 with Strome Mezzanine Fund LP (“Strome”). Strome was also granted observer rights on our Board. As consideration for such modification, we issued warrants to Strome to purchase up to 1,500,000 shares of our common stock, exercisable at price of $0.50 per share (as amended) (as further described in Note 21, Stockholders’ Equity, in our accompanying consolidated financial statements), which are carried on our consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise The warrants are exercisable for a period of five years, subject to customary anti-dilution adjustments, and may, in the event there is no effective registration statement covering the resale of the warrant shares, be exercised on a cashless basis in certain circumstances. Warrants exercisable for up to 1,500,000 shares of our common stock were outstanding as of December 31, 2020, with a derivative liability fair value of $704,707. In the event Strome decided to exercise these warrants, since shares of our common stock were available to settle the instrument, there would be no impact to our cash resources.
B. Riley Warrants. On October 18, 2018, we issued warrants to B. Riley to purchase up to 875,000 shares of our common stock, with an exercise price of $1.00 per share (as further described in Note 21, Stockholders’ Equity, in our accompanying consolidated financial statements), which are carried on the consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise. The warrants are exercisable for a period of seven years, subject to customary anti-dilution adjustments, and may, if at any time after the six-month anniversary of the issuance of the warrants there is no effective registration statement covering the re-sale of the shares of common stock underlying the warrants, be exercised on a cashless basis. Warrants exercisable for up to 875,000 shares of our common stock were outstanding as of December 31, 2020, with a derivative liability fair value of $443,188. In the event B. Riley decided to exercise these warrants (which are subject to certain contractual exercise limitations), since shares of our common stock were available to settle the instrument after considering the contractual exercise limitations, there would be no impact to our cash resources.
Contractual Obligations
The following table sets forth our principal cash operating obligations and commitments as of December 31, 2020, aggregating to approximately $49.5 million.
| Payments due by Year | ||||||||||||||||||||||||||||
| Total | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | ||||||||||||||||||||||
| Operating leases | $ | 41,948,685 | $ | 3,804,853 | $ | 3,525,158 | $ | 3,528,696 | $ | 3,526,406 | $ | 3,740,591 | $ | 23,822,981 | ||||||||||||||
| Employment contracts | 2,375,000 | 1,461,842 | 913,158 | - | - | - | - | |||||||||||||||||||||
| Consulting agreement | 5,146,499 | 4,554,399 | 592,100 | - | - | - | - | |||||||||||||||||||||
| Total | $ | 49,470,184 | $ | 9,821,094 | $ | 5,030,416 | $ | 3,528,696 | $ | 3,526,406 | $ | 3,740,591 | $ | 23,822,981 | ||||||||||||||
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.
Item 8. Financial Statements and Supplementary Data
All information required by this item is listed in the Index to Financial Statements in Part IV, Item 15(a)(1) of this Annual Report.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer(s) and principal financial officer(s), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the fiscal year ended December 31, 2020. This evaluation commenced in 2020 and continued until the filing of this Annual Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting based on the Internal Control—Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
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Based on our evaluation under the framework in COSO, our management concluded that our internal control over financial reporting was not effective as of December 31, 2020. This conclusion is based on such criteria and we believe that control over financial reporting was ineffective because: (i) we lacked monitoring over the completeness and accuracy of our underlying accounting records and had ineffective controls over our period end financial disclosure and reporting processes and information technology systems; (ii) we had inadequate segregation of duties consistent with control objectives; and (iii) we have a history of untimely filed periodic reports, including being unable to timely file our Annual Report on Form 10-K for the year ended December 31, 2018 (that was filed in January 2021), our Annual Report on Form 10-K for the year ended December 31, 2019, which included our quarterly results for 2019 (that was filed in April 2021), and our Quarterly Reports on Forms 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020, and September 30, 2020 (that were filed in May 2021). These weaknesses continue and have not been remediated as of the date of filing this Annual Report.
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated and begun to implement procedures intended to remediate the material weaknesses identified as of December 31, 2020. During fiscal 2020, we have engaged external certified public accountants to assist our accounting department and Chief Financial Officer in preparing the necessary periodic reports. In TheStreet Merger, we also acquired some additional employees with accounting experience that has assisted us with preparing our periodic reports. We believe our accounting department is now capable of bringing us current with our periodic filing obligations. In addition, our Audit Committee is now assisting our Board in fulfilling its responsibility to oversee (i) the integrity of our financial statements, our accounting and financial reporting processes, and financial statement audits, (ii) our compliance with legal and regulatory requirements, (iii) our systems of internal control over financial reporting and disclosure controls and procedures, (iv) the engagement of our independent registered public accounting firm, and its qualifications, performance, compensation, and independence, (v) review and approval of related party transactions, and (vi) the communication among our independent registered public accounting firm, our financial and senior management, and our Board.
In addition, we intend to undertake the following additional remediation measures to address the material weaknesses described in this Annual Report:
| (i) | we intend to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes; and | |
| (ii) | we intend to implement procedures pursuant to which we can ensure segregation of duties and hire additional resources to ensure appropriate review and oversight. |
We have been impacted by the COVID-19 pandemic, which has resulted in us being unable to fully implement our remediation plan. We will continue to evaluate and implement procedures as deemed appropriate to remediate these material weaknesses; however, we expect that the remediation of those matters that were deemed material weaknesses will be fully complete no later than December 31, 2021.
Auditor’s Report on Internal Control Over Financing Reporting
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes, we continue to review, test, and improve the effectiveness of our internal controls. Other than with respect to the remediation efforts discussed above, there have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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None.
Item 10. Directors, Executive Officers and Corporate Governance
Current Officers and Directors
The following table includes the names, ages and titles of our directors and executive officers. Directors are to be elected each year by our stockholders at an annual meeting. Each director holds his or her office until his or her successor is elected and qualified or resignation or removal. Executive officers are appointed by our Board. Each executive officer holds his or her office until he or she resigns or is removed by our Board or his or her successor is appointed and qualified.
| Name | Age | Current Title | Dates in Position or Office | |||
| Ross Levinsohn | 58 | Chief Executive Officer and Director (1) | August 26, 2020 – Present | |||
| Paul Edmondson | 46 | President, Platform (2) | October 10, 2019 – Present | |||
| Douglas Smith | 61 | Chief Financial Officer and Secretary | May 3, 2019 – Present | |||
| Andrew Kraft | 48 | Chief Operating Officer (3) | October 1, 2020 – Present | |||
| Avi Zimak | 46 | Chief Revenue and Strategy Officer | December 19, 2019 – Present | |||
| Jill Marchisotto | 44 | Chief Marketing Officer | October 1, 2020 – Present | |||
| H. Robertson Barrett | 54 | President, Media | February 18, 2021 – Present | |||
| John Fichthorn | 48 | Executive Chairman (4) | August 23, 2018 – Present | |||
| Peter Mills | 66 | Director (5) | September 20, 2006 - Present | |||
| Todd Sims | 51 | Director (6) | August 23, 2018 – Present | |||
| B. Rinku Sen | 54 | Director (7) | November 3, 2017 – Present | |||
| Daniel Shribman | 37 | Director (8) | June 11, 2021 – Present | |||
| Carlo Zola | 43 | Director (9) | June 11, 2021 – Present |
| (1) | Mr. Levinsohn held the title of Chief Executive Officer of Sports Illustrated from September 2019 until his appointment as our Chief Executive Officer and a director on August 26, 2020. | |
| (2) | Mr. Edmondson previously held the title of our Chief Operating Officer from August 2018 until December 2019. Mr. Edmondson also served as President from October 10, 2019 until February 18, 2021; however, on February 18, 2021, the role of President was split into two offices, President, Platform, which Mr. Edmondson holds, and President, Media. | |
| (3) | Mr. Kraft previously held the title of Executive Vice President and Chief Strategy and Revenue Officer from December 2018 until December 2019. | |
| (4) | Mr. Fichthorn is the Chairman of our Compensation Committee and serves on our Audit Committee and Special Finance and Governance Committee. | |
| (5) | Mr. Mills is the Chairman of our Audit Committee and serves on our Compensation Committee and Special Finance and Governance Committee. | |
| (6) | Mr. Sims is the Chairman of our Nominating and Corporate Governance Committee and serves on our Audit Committee. | |
| (7) | Ms. Sen is a member of our Nominating and Corporate Governance Committee. | |
| (8) | Mr. Shribman serves on our Nominating and Corporate Governance Committee and Special Finance and Governance Committee. | |
| (9) | Mr. Zola serves on our Compensation Committee. |
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Former Officers and Directors
The following table includes the names, ages, and titles of our directors and executive officers who served as a director or executive officer during fiscal 2020 but who no longer serve as an executive officer or director.
| Name | Age | Current Title | Dates in Position or Office | |||
| James Heckman | 55 | Chief Executive Officer and Director (1) | November 4, 2016 – August 26, 2020 | |||
| William Sornsin | 59 | Chief Operating Officer | November 4, 2016 – August 23, 2018; December 9, 2019 – September 4, 2020 | |||
| Benjamin Joldersma | 43 | Chief Technology Officer | November 4, 2016 – September 30, 2020 | |||
| Joshua Jacobs | 50 | Director (2) | May 31, 2017 – March 9, 2021 | |||
| David Bailey | 30 | Director | January 28, 2018 – June 10, 2021 | |||
| Eric Semler | 56 | Director | March 9, 2021 – June 8, 2021 |
| (1) | On August 26, 2020, Mr. Levinsohn replaced Mr. Heckman as our Chief Executive Officer and as a director. | |
| (2) | Mr. Jacobs previously served as our Executive Chairman from May 2017 until August 2018 and served as our President from January 2018 until October 2019. Mr. Jacobs terminated his employment with us in December 2019. He continued to serve as a director until March 9, 2021. |
Biographical Information on Officers and Directors
Ross Levinsohn has served as our Chief Executive Officer and a director since August 26, 2020. Mr. Levinsohn joined us on June 14, 2019 as the Chief Executive Officer of Sports Illustrated. Mr. Levinsohn also served as one of our directors briefly in 2017. Mr. Levinsohn was an executive with Tribune Publishing from August 21, 2017 until January 17, 2019, serving first as the Chief Executive Officer of the Los Angeles Times and then as the Chief Executive Officer of Tribune Interactive. He was the managing partner of Whisper Partners, an advisory firm, from June 2016 to August 2017. Mr. Levinsohn also previously served as Chief Executive Officer at Guggenheim Digital Media from January 2013 to June 2014, overseeing brands including The Hollywood Reporter and Billboard Magazine. He served in various executive positions at Yahoo! Inc. (“Yahoo!”), a global internet company, from October 2010 to August 2012, including as the Interim Chief Executive Officer and Executive Vice President, Head of Global Media and Head of the Americas. Mr. Levinsohn co-founded and served as managing director at Fuse Capital, an investment and strategic equity management firm focused on investing in and building digital media and communications companies, from 2007 to 2010. Prior to his time at Fuse Capital, Mr. Levinsohn spent six years at News Corporation, serving in roles including President of Fox Interactive Media and Senior Vice President of Fox Sports Interactive. Earlier in his career, Mr. Levinsohn held senior management positions with AltaVista, CBS Sportsline and HBO. We believe that Mr. Levinsohn is qualified to serve as one of our directors because of his vast executive experience with various media companies and his understanding of our business through his service as our Chief Executive Officer.
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Paul Edmondson has served as President of Platform since February 16, 2021, the date on which we split our President role into two separate officer roles. Prior to this appointment, he served as our President since October 10, 2019. Beginning on February 16, 2021, Mr. Edmondson’s role as President will be overseeing the Maven Platform operations. Mr. Edmondson also served as our Chief Operating Officer from August 23, 2018 until December 9, 2019. Mr. Edmondson oversees our platform business that offers the core content management system, programmatic advertising technology and multitenant subscription stack for publishers serving partner publishers and our owned and operated properties. Mr. Edmondson joined the Company with the acquisition of HubPages, where he served as Founder and Chief Executive Officer beginning in January 2006. Prior to HubPages, he served as the Group Product Manager for Microsoft Corporation’s MSN Entertainment. He joined Microsoft Corporation with the acquisition of MongoMusic, Inc., and prior to that he developed applications for Hewlett-Packard Company.
Douglas Smith has served as our Chief Financial Officer since May 3, 2019. Before joining us, Mr. Smith served as the Chief Financial Officer of Ashworth College from March 2016 to April 2019. Mr. Smith also served as the Chief Financial Officer of Scout Media from May 2015 to March 2016, GLM Shows from November 2011 to May 2014, EducationDynamics from July 2009 to November 2011, Datran Media from June 2005 to December 2008, and Peppers & Rogers Group from October 2000 to May 2005. From May 1993 to October 2000, Mr. Smith served as Senior Vice President and Treasurer of Primedia. Prior to his corporate experience, Mr. Smith served as the Senior Vice President of the Bank of New York from June 1982 to May 1993. Mr. Smith earned his Masters of Business Administration from Columbia Business School and his Bachelor of Arts in Economics from Connecticut College.
Andrew Kraft has served as our Chief Operating Officer since October 1, 2020. Mr. Kraft joined us in December 2018 and served in a variety of senior leadership roles before transitioning to a consulting role from April 2020 through October 2020, when he rejoined us as a full-time employee. Prior to joining us, Mr. Kraft served in a variety of roles on the executive team of Xandr, a division of AT&T Inc., formerly known as AppNexus, for seven years, including as the head of Business and Corporate Development, as a co-founder of the company’s publisher business and head of Publisher Strategy, and as the Chief Financial Officer. Previously, Mr. Kraft was the Senior Vice President, AMP & Publisher Solutions for Collective, where he led business development for the company’s audience management and monetization platform. Mr. Kraft studied Physics and Theater at the Massachusetts Institute of Technology.
Avi Zimak has served as our Chief Revenue Officer and Head of Global Strategic Partnerships since December 9, 2019. Before joining us, Mr. Zimak served as the Chief Revenue Officer & Publisher of New York Media from March 2017 to December 2019. From September 2012 to January 2015, Mr. Zimak served as the Vice President of Sales of North America for Outbrain. Mr. Zimak also served as the General Manager of The Americas for Outbrain from January 2015 to February 2017. He served on various management teams at Hearst Corporation from August 2007 to September 2012 and worked toward the launch and oversight of the Hearst App Lab. Mr. Zimak served in national sales roles for Condé Nast from 2003 to 2007, Time Inc. from 2001 to 2003, Advance Publications American City Business Journals from 1998 to 2001, and Ziff Davis from 1997 to 1998. Mr. Zimak received his Bachelor of Arts from the State University of New York at Potsdam in 1997.
Jill Marchisotto has served as our Chief Marketing Officer since October 1, 2020. She also served as our Chief Consumer Marketing & Membership Officer from November 2019 until October 2020. Ms. Marchisotto joined us in 2019 with our acquisition of TheStreet, where she led the consumer subscription business and marketing strategy for the brand’s suite of products, including Jim Cramer’s popular investment club. Her roles with TheStreet included Executive Director, Consumer Marketing from October 2017 until October 2019; Senior Director of Marketing from February 2017 until October 2017; and Director of Marketing from May 2016 until January 2017. From May 2013 to May 2016, Ms. Marchisotto worked on the Consumer Marketing, Retention, and Gift Program for Bloomberg L.P. Prior to that, Ms. Marchisotto worked extensively in both digital and print media and served in various marketing roles at Conde Nast and Wenner Media.
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H. Robertson Barrett has served as our President of Media since February 16, 2021. Before joining us, Mr. Barrett served as the President, Digital of Hearst Newspapers from January 2016 to February 2021. From February of 2014 to December of 2015, Mr. Barrett served as the Vice President of Media Strategy and Operations at Yahoo!, and from May 2011 through January of 2014, as Vice President of Yahoo! News and Yahoo! Finance. Mr. Barrett served as Chief Strategy Officer of Perfect Market, Inc., an IdeaLab company, from January 2010 through May 2011. He served in general management positions at Tribune Company from 2005 to 2009, including Senior Vice President and General Manager, Digital, for The Los Angeles Times from January 2005 through May 2008 and Executive Vice President, Tribune Interactive, from May 2008 through December 2009. Mr. Barrett had earlier digital management roles as Vice President and General Manager of Primedia Inc.’s ChannelOne.com from 1998 to 1999, as Vice President and General Manager of The FeedRoom, Inc., a broadband video venture backed by NBC and Tribune, from 1999 to 2001, and as a co-founder of Time.com, as Deputy Editor, in 1994 and 1995 and of ABCNews.com, as Managing Producer from 1996 to 1998. Mr. Barrett received a Bachelor of Arts in Ancient Greek from Duke University in 1988 and a Masters of Public Policy from Harvard University’s John F. Kennedy School of Government in 1994.
James Heckman served as our Chief Executive Officer and one of our directors from November 4, 2016 until his resignation on August 26, 2020. Mr. Heckman also served as our President from November 2016 through December 2017. Mr. Heckman has extensive experience in Internet media, advertising, video, and online communities. He was the Chief Executive Officer of North American Membership Group, Inc., including its subsidiary Scout Media, Inc., from October 2013 to May 2016, and Chairman of the board of directors from May 2016 to July 2016. From April 2011 to August 2012, Mr. Heckman served as Head of Global Media Strategy for Yahoo!. He was previously the Founder and Chief Executive Officer of 5to1, an advertising platform, from August, 2008 through its 2011 sale to Yahoo!; Chief Strategy Officer of Zazzle.com from 2007 to 2008; Chief Strategy Officer of FOX Interactive Media from 2005 to 2007, where he architected the ad alliance between Myspace; Founder and Chief Executive Officer of Scout.com, from April 2001 through to its sale to FOX Interactive Media in September 2005; Founder and Chief Executive Officer of Rivals.com from 1997 to 2000; and President and Publisher of NFL Exclusive, official publication for every NFL team, from 1991 to 1998. He holds a Bachelor of Arts in Communications from the University of Washington.
Joshua Jacobs served as a member of our Board from May 31, 2017 until March 9, 2021. Mr. Jacobs also served as President from January 1, 2018 to October 10, 2019, as Executive Chairman from May 1, 2017 until January 27, 2018. He has served as a member of the board of directors of Resonant Inc., a late-stage software development company located in Goleta, California, since June 2018, and as a member of the board of directors of Logiq, a global e-commerce, mCommerce, MarTech and Fintech enablement platform, since September 2020. Mr. Jacobs served as a member of the board of directors of Invoca, Inc., a private company focused on conversation intelligence software, from June 2012 until December 2020. Mr. Jacobs was the President, Services at Kik Interactive from May 2015 to December 2016. From June 2011 to April 2014, Mr. Jacobs was Chief Executive Officer of Accuen Media, an Omnicom Company. From September 2009 to April 2011, Mr. Jacobs was Senior Vice President of Marketing for Glam Media. From July 2007 to October 2009, Mr. Jacobs was the Vice President and General Manager of Advertising Platforms at Yahoo!. He has also held leadership positions at X1 Technologies and Bigstep. Mr. Jacobs also serves on the board of directors of the following public companies: Resonant Inc. (Nasdaq) and Logiq Inc. (OTCQX). We believe that Mr. Jacobs is qualified to serve as one of our directors because of his expertise and experience in digital media, technology, and advertising businesses.
William Sornsin was one of our founders and served as our Chief Operating Officer from November 2016 through August 2018, and then again from December 2019 until September 2020. Prior to joining us, Mr. Sornsin served as the Chief Technology Officer of North American Membership Group, Inc., including its subsidiary Scout Media, Inc., from October 2013 to January 2016, and as the Chief Operating Officer from January 2016 to July 2016. Mr. Sornsin ran MSN’s Core Technology team before joining Mr. Heckman in 1999 as co-founder and Chief Technology Officer of Rivals.com. In 2001, he became co-founder and Chief Technology Officer and Chief Operating Officer for the original Scout.com and served as the Vice President of Engineering and Operations at Fox Interactive Media after the acquisition of Scout Media, Inc. in 2005. Prior to his service at Rivals.com and Scout Media, Inc., Mr. Sornsin held a variety of roles at Microsoft, including Group Manager of MSN Core Technology and Product Planning Lead for Microsoft Exchange. He holds a Bachelor of Science in Electrical/Computer Engineering from the University of Iowa and a Masters of Business Administration from the University of California – Los Angeles.
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Benjamin Joldersma served as our Chief Technology Officer from November 2016 until September 2020. Mr. Joldersma has developed a deep expertise in large-scale systems, rapid development, and online product innovation. He served as the Chief Technology Officer of North American Membership Group, Inc., including its subsidiary Scout Media, Inc., from January 2016 to July 2016, and as the Chief Product Officer, responsible for product vision and all software engineering, from October 2013 to January 2016. Mr. Joldersma was a Senior Software Engineer at Google from December 2012 to October 2013, working on imagery-related products under the Geo organization, and Principal Software Engineer at Yahoo! from June 2011 to December 2012, working on advertising platform technology. He was a System Architect at 5to1 from August 2008 through its June 2011 sale to Yahoo!. Mr. Joldersma was the founder of Skull Squadron, a company at which he held software architecture and engineering positions from 2007 to 2009; was a founder of All-In-One Creations from 2004 to 2007; served as a software engineer at aQuantive in 2006; as a software design engineer at Pacific Edge Software in 2005; as a lead software architect at Scout Media, Inc. from 2001 to 2005; as a web developer at Rivals.com from 1999 to 2001; and as a web design engineer at Microsoft from 1998 to 1999. He studied Computer Science at the University of Puget Sound.
Peter Mills has served as one of our directors since September 2006. Mr. Mills is an entrepreneur in the San Francisco Bay Area. Since October 2016, he has served as the Chief Executive Officer of Track3t, a company developing automated indoor location services for manufacturers and distributors. He was the Chief Executive Officer of Cimbal, Inc., a startup company developing a mobile payments system in Los Altos, California, from March 2014 to December 2016. From May 2004 until December 2012, he was Vice President of Sales at Speck Design, a leading product design firm with offices in Palo Alto, California. From July 2007 to April 2008, Mr. Mills served as President, Chief Executive Officer, and Chairman of the board of directors of Integrated, our predecessor. He spent 15 years selling sophisticated industrial robotics and automation systems with Omron Adept Technology, Inc. (formerly known as Adept Technology, Inc.), the leading U.S. manufacturer of industrial robots, and Hewlett-Packard Company. He also served as the Vice President of Sales from October 2000 to September 2001 at Softchain, an enterprise supply chain software company acquired by RiverOne, Inc. in 2001, which was later acquired by i2 Technologies, Inc. in 2006. Mr. Mills has significant experience with respect to the design and manufacturing needs of a variety of industries including medical devices, disk drives, consumer products, food packaging, printers, computers and networking, and semiconductor equipment. He has extensive international business experience in Japan, Singapore, and Korea. Mr. Mills earned a Master of Business Administration from Harvard Business School and a Bachelor of Arts in engineering, cum laude, from Dartmouth College. We believe Mr. Mills is qualified to serve as one of our directors because of his prior management experience and significant business experience within a variety of technology-driven industries.
Todd Sims has served as a member of our Board since August 23, 2018. Mr. Sims has served as the President of B. Riley Venture Capital (“BRVC”), a wholly owned subsidiary of B. Riley since October 2020. Prior to his current position with BRVC, Mr. Sims served as a member of B. Riley’s board of directors from 2016 to 2020. Prior to his role at BRVC, Mr. Sims spent 10 years as Senior Vice President of Digital Strategy of Anschutz Entertainment Group, Inc., one of the leading sports and entertainment presenters in the world, overseeing business and corporate development for its ticketing business, AXS Digital, LLC. Prior to that, Mr. Sims spent more than 15 years building Internet businesses. In the mid-1990s, Mr. Sims served as ESPN’s executive producer of NFL.com, NBA.com, and NASCAR Online. Mr. Sims also served on the management team of eCompanies, LLC, an incubator which has incubated a number of companies including Jamdat Mobile Inc. (acquired by Electronic Arts Inc.), Business.com Inc. (acquired by R.H. Donnelley Corp.), and Boingo Wireless, Inc. Mr. Sims serves as an advisor to the Los Angeles Dodgers Tech Accelerator and was a guest lecturer at the University of Southern California’s Marshall School of Business. Mr. Sims graduated from Colorado College in 1992. Mr. Sims’ digital media experience provides an important resource to our Board and qualifies him for service as a director.
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John A. Fichthorn is our Executive Chairman and has served as a member of our Board since August 23, 2018. Mr. Fichthorn is currently the Founder and Portfolio Manager of MedTex Ventures. From April 2017 to April 2020, Mr. Fichthorn served as Head of B. Riley Alternatives, a division of B. Riley Capital Management, LLC (“B. Riley Capital Management”), which is an SEC-registered investment adviser and wholly owned subsidiary of B. Riley. From April 2020 until November 2020, he served as a consultant to B. Riley. Mr. Fichthorn was a Co-Founder of Dialectic Capital Management, LLC, an investment management firm, and has been a portfolio manager of the firm since 2003. Mr. Fichthorn was employed by Maverick Capital from 2000 until 2003, most recently as Managing Director of the technology group. From 1999 to 2000, Mr. Fichthorn was an analyst at Alliance Capital working across multiple hedge fund products and as a member of the technology team. From 1997 to 1999, Mr. Fichthorn was an analyst at Quilcap Corporation, a short-biased hedge fund where he covered all sectors, with a focus on technology. From 1995 to 1997, Mr. Fichthorn worked at Ganek & Orwicz Partners. Mr. Fichthorn is the lead independent director of Quantum Corporation since April of 2019, and he was a Director of Health Insurance Innovations (also known as Benefytt Corporation), Inc. from Dec 2017 until the company’s sale in August of 2020. Mr. Fichthorn also served on the boards of California Micro Devices and Immersion Corporation as well as several private company boards. Mr. Fichthorn has significant experience in accounting and financial matters with the unique perspective of representing the interests of stockholders on several public company boards, all of which qualify him for service as one of our directors.
B. Rinku Sen has served as one of our directors since November 3, 2017. Ms. Sen is a writer and a political strategist. She is currently the Executive Director of Narrative Initiative. She was formerly Executive Director and as Publisher of their award-winning news site Colorlines. She was also a James O. Gibson Innovation Fellow at PolicyLink. Her books Stir it Up and The Accidental American theorize a model of community organizing that integrates a political analysis of race, gender, class, poverty, sexuality, and other systems. She has served on numerous non-profit boards, including the Women’s March, where she is co-President, The Nation editorial board, and the Foundation for National Progress, and is publisher of Mother Jones magazine. We believe that Ms. Sen is qualified to serve as a director because of her experience and qualifications as a journalist, publisher, and political activist, as well as her experience in serving on many non-profit boards, including leadership positions in governance, finance, and executive committees.
Daniel Shribman has served as one of our directors since June 11, 2021. He has served as the Chief Investment Officer of B. Riley since 2019 and President of its B. Riley Principal Investments subsidiary, which acquires, invests, and operates companies with a focus on maximizing cash flows through operational expertise, since 2018. Mr. Shribman has served as a member of the board of directors of Alta Equipment Group Inc. (NYSE: ALTG) since February 2020 and as a member of the board of directors and audit committee chair of Eos Energy Enterprises (Nasdaq: EOSE) since November 2020. ALTG and EOSE previously completed successful business combinations with two special purpose acquisition companies (or SPACs), B. Riley Principal Merger and B. Riley Principal Merger II, sponsored by a subsidiary of B. Riley. Mr. Shribman has served as the Chief Executive Officer of B. Riley Principal 150 Merger Corp. and B. Riley Principal 250 Merger Corp. since April 2021 and May 2021, respectively. Prior to joining B. Riley, Mr. Shribman was a Portfolio Manager at Anchorage Capital Group, L.L.C., a special situation asset manager with over $15 billion in assets under management. During his tenure, he led investments in dozens of public and private opportunities across the general industrials, transportation, automotive, aerospace, gaming, hospitality and real estate industries. These investments ranged from public equities and bonds to deeply distressed securities, par bank debt, minority owned private equity, and majority owned private equity. Mr. Shribman obtained a MA degree in Economics and History from Dartmouth College. We believe that Mr. Shribman is qualified to serve as a director because of his previous experience working in close collaboration with management teams and boards to maximize shareholder value in the form of both operational turnarounds, capital markets financings and communication and capital deployment initiatives.
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Carlo Zola has served as one of our directors since June 11, 2021. He is an investment professional with over 19 years of active experience in the financial markets. Mr. Zola started his professional career in 2002 as a research analyst at Intermonte SIM in Milan, the leading independent Italian investment bank. In 2004, Mr. Zola started working at the largest fund management company in the world with over $2 trillion under management, Capital Group, where he held positions as analyst and portfolio manager in Los Angeles, New York, Toronto and London. Over 13 years at Capital Group, Mr. Zola successfully managed a portfolio of over $1 billion in assets, with responsibilities in global and income mandates as well as more focused mandates in Media, Metals and Mining, Chemicals and Real Estate (REITs). During the last 3 years at Capital Group, Mr. Zola also served as Research Portfolio Coordinator (RPC) overseeing investments by a team of over 20 analysts for one of its Growth and Income funds. An early investor in crypto currencies, Mr. Zola left Capital Group in 2018 and has been a founding partner at Paladin Trust, a leading Trust and Custodian business dedicated to the crypto markets founded in 2018. Since January 2020, Mr. Zola is a founding partner at Percival Ventures, an investment firm based in Puerto Rico, focused on early stage blockchain investments and crypto currencies. In late 2020, Mr. Zola was among the founding partners of Atlas Capital Team, L.P. an asset management company in which he retains an active position as Portfolio Manager with a mandate focused on Real Estate and ESG investments. Finally, Mr. Zola serves as a principal of Warlock Partners, LLC (“Warlock”) and of Roundtable Media L.L.C. (“Roundtable Media”). Mr. Zola holds a Bachelor of Arts degree in Economics from Bocconi University in Milan, Italy, where he graduated Summa cum Laude in 2002 and a Master’s degree in management from CEMS, the Community of European Management Schools, which he attended at ESADE in Barcelona, Spain. We believe that Mr. Zola is qualified to serve as a director because of his extensive financial market experience.
David Bailey served as one of our directors from January 28, 2018 until his resignation on June 10, 2021. Since 2013, Mr. Bailey has served as the Co-Founder and Chief Executive Officer of BTC Inc., which is an industry leader in the digital currency and blockchain space. Through its subsidiaries, BTC Inc. is the publisher of the world’s leading digital (Bitcoin Magazine, Distributed, and Let’s Talk Bitcoin Network) and print publications (Distributed Magazine and yBitcoin Magazine) dedicated to the cryptocurrency and blockchain spaces, an internationally recognized conference series, a blockchain venture studio, a marketing firm and more. Through his guidance, the company has reached millions of readers, facilitated dozens of clients and pioneered technology that is helping build the future. Mr. Bailey is also a board member of Po.et, a shared, open, universal ledger designed to record metadata and ownership information for digital creative assets. After a highly successful token sale and the first wave of publishers integrating with Po.et, the platform is poised to become a new standard for rewarding content creators and publishers alike. Mr. Bailey is also a member of the board of directors of Blockchain Education Network, sits on the board of advisors for the University of Alabama, and since September 2019 has been the general partner of UTXO Management. Mr. Bailey is a graduate of the University of Alabama. We believe that Mr. Bailey was qualified to serve as a director because of his experience in print and digital publications.
Eric Semler served as one of our directors from March 9, 2021 until his resignation on June 8, 2021. Mr. Semler is a longtime investor in technology and media. Mr. Semler serves as the Managing Member of TCS Capital Management LLC (“TCS Capital Management”), a hedge fund that he founded in 2001. TCS Capital Management is among the largest independent technology, media and telecommunications investment funds with assets of $3.4 billion. In 2019, Mr. Semler and his spouse, Tracy, partnered with NBA parents Dell and Sonya Curry in founding and developing the Raising Fame podcast franchise. Prior to founding TCS Capital Management, Mr. Semler worked as an analyst from 1998 to 2000 for Georgica Advisors, an investment fund focused on media and communications stocks. From 1997 to 1998, he was an investment banking principal in the media and communications group at Montgomery Securities. From 1994 to 1997, Mr. Semler focused on mergers and acquisitions as an associate at James D. Wolfensohn & Co. Mr. Semler began his career as a journalist working for the New York Times and for the Moscow News in Russia. He is the co-author of two books published by Harper Collins: The Language of Nuclear War and The Businessman’s Guide to Moscow. Mr. Semler is the founder and chairman of the Bronx Baseball Dreams Foundation, which is a charitable organization that helps New York City youth develop baseball and academic skills to earn college baseball scholarships. He also serves on the board of directors of 8th Wall, a Palo Alto start-up company focused on creating augmented reality products. Mr. Semler has previously served on two public company boards: Angie’s List and Geeknet.com. He also served as a board member of dealtime.com, Classic Media, Channel 13/WNET TV, WNYC Radio, Wave Hill, Van Cortlandt Park Conservancy and the Dwight School. Originally from Portland, Oregon, Mr. Semler received his B.A. from Dartmouth College in 1987 and his J.D. and M.B.A. from Harvard University in 1994. Mr. Semler’s extensive experience as an investor in the technology and media industries qualified him to serve as a member of our Board.
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Family Relationships
There are no family relationships among any of our directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved in any legal or regulatory proceedings, as set forth in Item 401 of Regulation S-K, during the past ten years.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers, directors, and persons who own more than ten percent of a class of our equity securities that is registered pursuant to Section 12 of the Exchange Act within specified time periods to file certain reports of ownership and changes in ownership with the SEC. Officers, directors, and ten-percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of copies of the reports furnished to us and written representations from persons concerning the necessity to file these reports, we believe that all reports required to be filed pursuant to Section 16(a) of the Exchange Act during fiscal 2020 were filed with the SEC on a timely basis, except for the following:
| Reporting Person (9) | Number
of Late Reports | Number
of Transactions Not Reported On a Timely Basis | Number
of Known Failures to File Required Form | |||||||||
| John Fichthorn (1) | 3 | 3 | 0 | |||||||||
| Ross Levinsohn (2) | 1 | 5 | 0 | |||||||||
| Peter Mills (3) | 1 | 1 | 0 | |||||||||
| Joshua Jacobs (4) | 1 | 1 | 0 | |||||||||
| B. Rinku Sen (5) | 1 | 1 | 0 | |||||||||
| David Bailey (6) | 1 | 1 | 0 | |||||||||
| Todd Sims (7) | 2 | 2 | 0 | |||||||||
| Paul Edmonson (8) | 1 | 4 | 1 | |||||||||
| Douglas Smith | 0 | 0 | 0 | |||||||||
| James Heckman | 0 | 0 | 0 | |||||||||
| Benjamin Joldersma | 0 | 0 | 0 | |||||||||
| Avi Zimak | 0 | 0 | 0 | |||||||||
| William Sornsin | 0 | 0 | 0 | |||||||||
| H. Robertson Barrett (10) | - | - | - | |||||||||
| Eric Semler (10) | - | - | - | |||||||||
| Jill Marchisotto (11) | 2 | 3 | 0 | |||||||||
| Andrew Kraft (12) | 1 | 3 | 0 | |||||||||
| Carlo Zola (10) | - | - | - | |||||||||
| Daniel Shribman (10) | - | - | - | |||||||||
| (1) | Delinquent reports include: for 2020, three reports. | |
| (2) | Delinquent reports include: for 2020, one report. | |
| (3) | Delinquent reports include: for 2020, one report. | |
| (4) | Delinquent reports include: for 2020, one report. | |
| (5) | Delinquent reports include: for 2020, one report. | |
| (6) | Delinquent reports include: for 2020, one report. | |
| (7) | Delinquent reports include: for 2020, two reports. | |
| (8) | Delinquent reports include: for 2020, one report (consisting of the failure to file a Form 4 to report 4 transactions, all of which occurred on December 31, 2020). |
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| (9) | To our knowledge, B. Riley FBR, and its affiliates, 180 Degree Capital Corp., and Mark E. Strome, each of which is currently or was previously a greater than 10% stockholder, timely filed all of their respective Section 16 filings. The table does not include any information related to any of our other greater than 10% stockholders as we do not have any knowledge as to any delinquent or missing Section 16 filings for such stockholders. | |
| (10) | Messrs. Barrett, Semler, Zola, and Shribman were all appointed during fiscal 2021 and did not serve in their respective capacities during fiscal 2020. | |
| (11) | Delinquent reports include: for 2020, two reports. | |
| (12) | Delinquent reports include: for 2020, one report. |
Code of Ethics
A Code of Ethics and Business Conduct that applies to our executive officers and other employees, was approved and adopted by our Board on January 1, 2020. Subsequently, our Board adopted an Amended and Restated Business Code of Ethics and Conduct (the “Code of Ethics”) and a Code of Ethics for Financial Officers (the “Senior Officer Code”), which applies to the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Chief Accounting Officer, Director Accounting, and Corporate Controller, on March 9, 2021. Copies of the Code of Ethics and Senior Officer Code may be obtained free of charge by written request to TheMaven, Inc., attention Chief Financial Officer, 225 Liberty Street, 27th Floor, New York, New York 10281. We have also filed copies of the Code of Ethics and Senior Officer Code as exhibits to this Annual Report.
Nominating and Corporate Governance Committee
We have not adopted any material changes to the procedures by which security holders may recommend nominees to our Board.
Audit Committee
The Audit Committee of our Board was formed September 14, 2018. The Audit Committee assists our Board in fulfilling its responsibility to oversee (a) the integrity of our financial statements, our accounting and financial reporting processes and financial statement audits, (b) our compliance with legal and regulatory requirements, (c) our systems of internal control over financial reporting and disclosure controls and procedures, (d) the independent auditor’s engagement, qualifications, performance, compensation, and independence, (e) review and approval of related party transactions, and (f) the communication among our independent auditors, our financial, and senior management and our Board. The Audit Committee currently consists of Peter Mills, who serves as its Chairman, John Fichthorn, and Todd Sims. Our Board has determined that Mr. Mills, the Chairman of the Audit Committee, is an “audit committee financial expert” as defined under SEC rules.
Item 11. Executive Compensation
The following table sets forth certain compensation awarded to, earned by, or paid to the following “named executive officers,” which is defined as follows:
| (a) | all individuals serving as our principal executive officer during the year ended December 31, 2020; | |
| (b) | each of our two other most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2020; and | |
| (c) | any individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the fiscal year ended December 31, 2020. |
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Summary Compensation Table
| (a)
Name and Principal Position | (b) Year | (c) Salary | (d) Bonus | (f)
Option Awards (1) | (i)
All Other Compensation | (j) Total Compensation | ||||||||||||||||||
| Ross Levinsohn | 2020 | $ | 412,585 | $ | 200,000 | $ | - | $ | - | $ | 612,585 | |||||||||||||
| Chief Executive Officer and Director (2) | 2019 | - | - | - | - | - | ||||||||||||||||||
| James Heckman | 2020 | 270,059 | - | - | 116,667 | (3) | 386,726 | |||||||||||||||||
| Former Chief Executive Officer and Director | 2019 | 320,333 | 105,500 | 5,803,682 | - | 6,229,515 | ||||||||||||||||||
| Andrew Kraft | 2020 | 188,659 | 120,000 | - | 150,000 | (4) | 458,659 | |||||||||||||||||
| Chief Operating Officer and Former Chief Venture Officer | 2019 | - | - | - | - | - | ||||||||||||||||||
| Avi Zimak | 2020 | 412,585 | 77,175 | - | - | 489,760 | ||||||||||||||||||
| Chief Revenue Officer(5) | 2019 | - | - | - | - | - | ||||||||||||||||||
| (1) | Reflects the fair value of option awards during the years in accordance with FASB ASC 718, Compensation – Stock Compensation (refer to our accompanying consolidated financial statements for valuation assumptions in Note 22, Stock-Based Compensation). | |
| (2) | Mr. Levinsohn was appointed as our Chief Executive Officer in August 2020. | |
| (3) | “All Other Compensation” consists of $116,667 that Mr. Heckman received from September 2020 until December 2020 pursuant to a Separation Agreement and a Consulting Agreement, both of which were entered into in August 2020. | |
| (4) | Mr. Kraft was appointed as Chief Operating Officer in October 2020. “All Other Compensation” consists of $150,000 that Mr. Kraft received pursuant to a Confidential Separation Agreement and General Release (the “Kraft Separation Agreement”) that was signed in April 2020. | |
| (5) | Mr. Zimak was appointed as Chief Revenue Officer in December 2019. |
Narrative Discussion of Summary Compensation Table of Named Executive Officers
The following is a narrative discussion of the material information that we believe is necessary to understand the information disclosed in the foregoing Summary Compensation Table. The following narrative disclosure is separated into sections, with a separate section for each of our named executive officers.
With respect to fiscal 2019 and fiscal 2020, each named executive officer received a base salary and was eligible for a stock option award pursuant to either our 2016 Stock Incentive Plan (the “2016 Plan”) or our 2019 Plan. Information on the specific components of the 2016 Plan and the 2019 Plan can be found below under the heading “Securities Authorized for Issuance Under Equity Compensation Plans.”
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Ross Levinsohn
Stock Option Awards During Fiscal 2020
Mr. Levinsohn did not receive any stock option awards during fiscal 2020.
Employment Agreements
On September 16, 2019, we entered into an employment agreement with Mr. Ross Levinsohn (the “Levinsohn Employment Agreement”). The Levinsohn Employment Agreement contemplated an initial employment term from September 16, 2019 through December 31, 2022, with automatic one-year renewals absent notice from either party. Pursuant to the Levinsohn Employment Agreement, Mr. Levinsohn served as the Chief Executive Officer of Sports Illustrated; President of Maven Media; and a director. Mr. Levinsohn was paid a base salary of $450,000 per annum, subject to an annual adjustment, a one-time signing bonus of $100,000, and was entitled to the same employment benefits available to our employees as well as the reimbursement of business expenses during the term of employment. Mr. Levinsohn was also entitled to certain performance-based annual and quarterly cash bonuses and equity incentive awards. The Levinsohn Employment Agreement provided for various termination events under which he would have been entitled to salary continuance for the remainder of the current term plus one year, including quarterly bonuses for the remainder of the current term, and full, immediate acceleration of vesting of his unvested equity awards. He was also subject to a restrictive covenant on competitive employment during the term of the Levinsohn Employment Agreement, and a restrictive covenant on solicitation of our employees, customers, and vendors for up to six months after termination of the Levinsohn Employment Agreement.
On May 1, 2020, we amended the Levinsohn Employment Agreement (the “Amended Levinsohn Employment Agreement”). The Amended Levinsohn Employment Agreement amends the Levinsohn Employment Agreement such that Mr. Levinsohn was to be paid a salary of $427,500 per annum. It also amended the Levinsohn Employment Agreement such that it provided for various termination events under which he would be entitled to eighteen months of salary continuance, including quarterly bonuses for the eighteen-month period. Pursuant to the Amended Levinsohn Employment Agreement, Mr. Levinsohn was to continue to serve as the Chief Executive Officer of Sports Illustrated; President of Maven Media; and a director.
On February 18, 2021, we entered into the second amended and restated executive employment agreement (the “Second A&R Employment Agreement”), which was effective as of August 26, 2020, the date on which Mr. Levinsohn was appointed as our Chief Executive Officer. The Second A&R Employment Agreement amends and restates the Levinsohn Employment Agreement and the Amended Levinsohn Employment Agreement. Pursuant to the terms of the Second A&R Employment Agreement, Mr. Levinsohn will continue to serve as our Chief Executive Officer through December 31, 2023, subject to automatic renewal for an additional one-year term, or until the Second A&R Employment Agreement is terminated in accordance with its terms. The Second A&R Employment Agreement provides that Mr. Levinsohn will be paid an annual base salary of $550,000, subject to annual review by our Board, and, should any member of our leadership receive an increase in their annual salary, he will receive an increase in base salary equal to that percentage increase. Mr. Levinsohn is also eligible to earn an annual bonus based on a target bonus amount of $1 million, which will be earned and payable upon the completion of certain performance thresholds. He is also eligible to participate in the 2019 Plan and is entitled to the same employment benefits available to our employees, as well as to the reimbursement of business expenses during his term of employment. The Second A&R Employment Agreement provides for various termination events under which Mr. Levinsohn would be entitled to annual bonuses earned but not yet paid and salary continuation through December 31, 2023, or the end of any renewal term, if applicable, but in no event will he be eligible to less than twelve months of salary continuation and reimbursement of 18 consecutive months of COBRA costs. Mr. Levinsohn is also subject to restrictive covenants on solicitation of employees, solicitation of customers, use of trade secrets, non-disparagement, and competition.
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James Heckman
Stock Option Awards During Fiscal 2019 and Fiscal 2020
| Grant Date | Number of Options | Exercise Price Per Share | ||||||
| 4/10/2019 | (1) | 14,509,205 | (2) | $ | 0.46 | |||
| (1) | Grant of stock options pursuant to the 2019 Plan. |
| (2) | Originally, shares of our common stock underlying the stock options vested one-third on the first anniversary of the grant date, with the remaining vesting monthly over the next two years, subject to certain stock price conditions. Pursuant to the 2019 Amendment (as defined below), 2,000,000 shares were vested as of June 3, 2021, with the remaining portion subject to performance-vesting based on the Company’s stock price. |
Employment and Other Agreements
On November 4, 2016, we entered into an employment agreement with Mr. James Heckman (the “Heckman Employment Agreement”). The Heckman Employment Agreement contemplated an employment term of a period of three years beginning on July 18, 2016, with Mr. Heckman serving as our Chief Executive Officer, President, and a director. Mr. Heckman was paid a base salary of $300,000 per annum, subject to an annual adjustment by our Board, and was entitled to the same employment benefits available to our employees as well as the reimbursement of business expenses during the term of employment. The Heckman Employment Agreement provided for various termination events under which he would have been entitled to one year’s severance equal to his annual salary amount. He is also subject to a restrictive covenant on competitive employment for up to two years after termination of the Heckman Employment Agreement, so long as we continue to pay his annual salary amount during that period, and a restrictive covenant on solicitation of our employees, customers, and vendors for up to one year after termination of the Heckman Employment Agreement. Mr. Heckman resigned as our Chief Executive Officer and a director on August 26, 2020 and we entered into a Separation Agreement with him with respect to his service in those positions. On the same date, we entered into a Consulting Agreement with Mr. Heckman, pursuant to which Mr. Heckman will serve as a consultant for a one-year period beginning on August 26, 2020. On June 3, 2021, Maven Coalition and Mr. Heckman amended and restated the consulting agreement (the “Heckman Amendment”). Pursuant to the Heckman Amendment, Mr. Heckman agreed to provide certain strategic advisory services to Maven Coalition in exchange for a monthly fee of approximately $57,895 per month (the “Heckman Monthly Fee”), beginning in February 2021 through the remainder of the term of the Heckman Amendment, or August 2022. The Heckman Monthly Fee payments may be partially accelerated in the event of certain financings. In addition, Mr. Heckman’s eligibility to be retained by Maven Coalition, and provide services pursuant to the Heckman Amendment, is conditioned upon Mr. Heckman’s execution of, and not subsequently revoking, a General Release and Continuing Obligations Agreement (“GRCOA”) between Mr. Heckman, Maven Coalition, Maven Media, TheStreet, Heckman Media, LLC, and us. The GRCOA addresses certain agreements between the parties related to certain stock options previously granted by us to Mr. Heckman and voting agreements related to the shares issuable upon exercise of those options, among other items. Pursuant to the terms of the GRCOA, we amended that certain 2016 Stock Incentive Plan Option Agreement dated September 14, 2018 (the “Original 2016 Option”) and that certain 2019 Equity Incentive Plan Option Agreement dated April 10, 2019 (the “Original 2019 Option”). The amendment to the Original 2016 Option (the “2016 Amendment”) clarifies that the option qualifies as a non-statutory stock option and that it remains exercisable for the remainder of the term of the option. The amendment to the Original 2019 Option (the “2019 Amendment”) also clarifies that the option qualifies as a non-statutory stock option and that it remains exercisable for the remainder of the term of the option. The 2019 Amendment also changed the vesting schedule of the option to provide for immediate vesting of a portion of the option, with the remainder of the option being subject to performance-based vesting that is tied to the price of our common stock.
Andrew Kraft
Stock Option Awards During Fiscal 2020
Mr. Kraft did not receive any stock option awards during fiscal 2020.
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Employment Agreement
On December 13, 2018, we entered into an executive employment agreement with Mr. Andrew Kraft (the “2018 Kraft Employment Agreement”). The 2018 Kraft Employment Agreement contemplated a term that commenced on December 13, 2018 and continued indefinitely until it was terminated in accordance with the provisions of the 2018 Kraft Employment Agreement. The 2018 Kraft Employment Agreement provided that Mr. Kraft would serve as the Executive Vice President and Chief Strategy and Revenue Officer. Mr. Kraft was paid an annual salary of $300,000, subject to annual review by our Board. Mr. Kraft was also eligible for annual and quarterly bonuses upon the achievement of certain performance objectives. He was also eligible to receive time- and performance-based stock option awards. On January 1, 2020, we amended and restated the 2018 Kraft Employment Agreement (the “Amended Kraft Employment Agreement”). Pursuant to the Amended Kraft Employment Agreement, Mr. Kraft served as our Chief Venture Officer and received an annual salary of $360,000, subject to annual review by our Board. The Amended Kraft Employment Agreement also contemplated an employment term that terminated on April 10, 2020, unless otherwise terminated by the parties.
On April 10, 2020, we entered into the Kraft Separation Agreement. Pursuant to the Kraft Separation Agreement, we agreed to pay Mr. Kraft a severance payment of $150,000 upon his termination as an employee on April 10, 2020, such payment being paid in lieu of any amounts which may have been owed to Mr. Kraft pursuant to the Amended Kraft Employment Agreement. The Kraft Separation Agreement also provided for accelerated vesting of certain of the option awards granted to Mr. Kraft in connection with his employment with us. It also provided that Mr. Kraft would be subject to certain post-employment obligations, including those provided by the Amended Kraft Employment Agreement, as well as confidentiality, non-solicitation, and non-disparagement obligations. Mr. Kraft also agreed to a general release of claims against us, and we agreed to a limited release of claims against Mr. Kraft, including certain claims against Mr. Kraft arising in connection with his employment with us.
On April 11, 2020, we entered into a consulting agreement with Mr. Kraft (the “Kraft Consulting Agreement”). Pursuant to the Kraft Consulting Agreement, Mr. Kraft would perform consulting services for us beginning on April 11, 2020 until either party provided notice of termination to the other party. The Kraft Consulting Agreement provided that Mr. Kraft would be paid $10,000 per month for the performance of consulting services as an independent contractor.
On October 1, 2020, we entered into an employment agreement with Mr. Kraft (the “2020 Kraft Employment Agreement”). The 2020 Kraft Employment Agreement contemplated a term that commenced on October 1, 2020 and continues indefinitely until it is terminated in accordance with the provisions of the 2020 Kraft Employment Agreement. The 2020 Kraft Employment Agreement provides that Mr. Kraft will serve as our Chief Operating Officer. Mr. Kraft will be paid an annualized salary of $380,000 under the 2020 Kraft Employment Agreement, subject to annual review by the Board, with a reduction of 15% during the month of October 2020. Mr. Kraft is also eligible for annual bonuses of up to $220,000, payable in quarterly payments and subject to achievement of certain performance metrics, except that Mr. Kraft was guaranteed to receive the full pro rata amount of the quarterly payments for the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021. Further, he is eligible to receive stock option awards under the 2019 Plan and is entitled to the same employment benefits available to our employees, as well as the reimbursement of business expenses during his term of employment. The 2020 Kraft Employment Agreement provides for various termination events under which Mr. Kraft would be entitled to 50% of his annualized salary, his annual bonus based on 100% of goal attainment, payment for bonuses already earned, and immediate acceleration of the vesting of any unvested time or stock price target options. Mr. Kraft is also subject to restrictive covenants on solicitation of employees and customers for a period of one year after the termination of the 2020 Kraft Employment Agreement and on competition and use of trade secrets during his employment with us.
On February 22, 2021, effective January 1, 2021, we amended and restated the 2020 Kraft Employment Agreement (the “A&R Kraft Agreement”). Pursuant to the terms of the A&R Kraft Agreement, Mr. Kraft will continue to serve as our Chief Operating Officer indefinitely until the A&R Kraft Agreement is terminated in accordance with its terms. The A&R Kraft Agreement provides that Mr. Kraft will be paid an annual base salary of $380,000, subject to annual review by our Board. Mr. Kraft is also eligible to earn an annual bonus equal to $220,000 based on attainment of certain performance metrics. He is also eligible to participate in the 2019 Plan and is entitled to the same employment benefits available to the employees, as well as to the reimbursement of business expenses during his term of employment. The A&R Kraft Agreement provides for various termination events under which Mr. Kraft would be entitled to one year’s severance equal to his annual salary and bonus amounts based on achievement of 100% of his personal goals. Mr. Kraft is also subject to restrictive covenants on solicitation of employees, solicitation of customers, use of trade secrets, and competition with the Company for a period of up to one year after termination of the A&R Kraft Agreement.
Avi Zimak
Stock Option Awards During Fiscal 2020
Mr. Zimak did not receive any stock option awards during fiscal 2020.
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Employment Agreement
On November 2, 2019, we entered into an employment agreement with Mr. Avi Zimak (the “Zimak Employment Agreement”), pursuant to which Mr. Zimak agreed to serve as our Chief Revenue Officer and Head of Global Strategic Partnerships beginning on November 2, 2019 and continuing for a period of two years. The Zimak Employment Agreement provides that Mr. Zimak is paid an annual salary of $450,000, subject to annual review by our Chief Executive Officer, and is entitled to the same employment benefits available to our employees as well as the reimbursement of business expenses during the term of employment. Pursuant to the Zimak Employment Agreement, Mr. Zimak received a one-time signing bonus equal to $250,000. Mr. Zimak is also eligible for an annual bonus of up to $450,000 based upon the achievement of certain performance objectives, a ten-year option to purchase up to 2,250,000 shares of our common stock pursuant to the 2019 Plan, vesting in accordance with the achievement of certain performance objectives, and an award of restricted stock units relating to 250,000 shares of our common stock. The Zimak Employment Agreement provides for various termination events under which he would be entitled to salary continuance for the longer of (i) the remainder of the term of the Zimak Employment Agreement or (ii) one year following the date of the termination, and all of the shares of our common stock underlying the restricted stock units awarded to Mr. Zimak pursuant to the Zimak Employment Agreement. He is also subject to a restrictive covenant on solicitation of employees for a period of one year after the termination of the Zimak Employment Agreement and a restrictive covenant on solicitation of customers during the term of the Zimak Employment Agreement and for a period of one year following the termination of his employment.
On June 14, 2020, the parties entered into an Amended & Restated Executive Employment Agreement (the “Zimak Amended Agreement”). Pursuant to the terms of the Zimak Amended Agreement, Mr. Zimak’s annual salary was reduced to $427,500 effective April 1, 2020 and then further reduced to $363,375, effective June 14, 2020 until December 31, 2020. Beginning January 1, 2021, Mr. Zimak’s annual salary was set at $450,000. Pursuant to the terms of the Zimak Amended Agreement, Mr. Zimak would be entitled to an annual base bonus equal to $375,000 for fiscal 2020 and $450,000 for fiscal 2021 and beyond, which bonus could be earned based on certain annual revenue targets. The Zimak Amended Agreement contemplated that to the extent earned, the annual bonus would be paid quarterly based on the achievement in a quarter of a portion of the annual revenue target then in effect. The Zimak Amended Agreement provides for various termination events under which he is entitled to salary continuance for the longer of (i) the remainder of the term of the Zimak Amended Agreement or (ii) one year following the date of the termination, and all of the shares of our common stock underlying the restricted stock units awarded to Mr. Zimak pursuant to the Zimak Employment Agreement. He is also subject to a restrictive covenant on solicitation of employees for a period of one year after the termination of his employment and a restrictive covenant on solicitation of customers during his employment and for a period of one year following the termination of his employment.
On February 22, 2021, effective January 1, 2021, the parties entered into a Second Amended and Restated Executive Employment Agreement (the “A&R Zimak Employment Agreement”). Pursuant to the terms of the A&R Zimak Employment Agreement, Mr. Zimak will serve as the Company’s Chief Revenue Officer for a two-year period beginning on January 1, 2021, subject to automatic renewal for one year terms, or until the A&R Zimak Employment Agreement is terminated in accordance with its terms. The A&R Zimak Employment Agreement provides that Mr. Zimak will be paid an annual base salary of $450,000, subject to annual review by our Board. Mr. Zimak is also eligible to earn an annual bonus based on a target bonus amount of $450,000 with respect to calendar years 2021 and beyond, subject to certain performance conditions. Mr. Zimak received a one-time signing bonus in the amount of $250,000, which must be repaid to us in the event Mr. Zimak is terminated for cause or resigns other than for good reason. He is also eligible to participate in the 2019 Plan and is entitled to the same employment benefits available to the employees, as well as to the reimbursement of business expenses during his term of employment. The A&R Zimak Employment Agreement provides for various termination events under which Mr. Zimak would be entitled to salary continuation for up to one year. Mr. Zimak is also subject to restrictive covenants on solicitation of employees, solicitation of customers, use of trade secrets, and competition with us for a period of up to one year after termination of the A&R Zimak Employment Agreement.
Director Compensation
In fiscal 2020, we compensated our independent directors with equity awards. We also provided additional compensation for a director who acts as chairperson of one or more committees of our Board. A director who is also an executive officer does not receive any additional compensation for these services as a director while providing service as an executive officer. The following table sets forth, for the year ended December 31, 2020, the compensation paid to the members of our Board.
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Director Compensation
(a) Name of Director (1) | (b) Fees
Earned | (c) Stock | (d) Option | (g) All Other Compensation (include narrative disclosure of amounts) (4) | (h) Total | |||||||||||||||
| Peter Mills (5) | $ | 6,250 | $ | 102,500 | $ | - | $ | - | $ | 108,750 | ||||||||||
| David Bailey (6) | 6,250 | 51,250 | - | - | 57,500 | |||||||||||||||
| Rinku Sen (7) | 6,250 | 51,250 | - | 12,050 | 69,550 | |||||||||||||||
| Todd D. Sims (8) | 6,250 | 102,500 | - | - | 108,750 | |||||||||||||||
| John A. Fichthorn (9) | 7,500 | 102,500 | 375,000 | - | 485,000 | |||||||||||||||
| Joshua Jacobs (10) | 6,250 | 51,250 | - | 120,000 | 177,500 | |||||||||||||||
| (1) | Mr. Heckman and Mr. Levinsohn are each named executive officers and, accordingly, their compensation is included in the “Summary Compensation Table” above. Neither Mr. Heckman nor Mr. Levinsohn received any compensation for their service as a director for the year ended December 31, 2020. | |
| (2) | Restricted stock awards were issued pursuant to the 2019 Plan and the 2020 Compensation Policies (as defined below). Each of these restricted stock awards were fully vested as of December 31, 2020. The table reflects the fair value amount in accordance with ASC Topic 718. | |
| (3) | Stock option awards were granted to directors pursuant to approval by our Board. For valuation assumptions on stock option awards refer to the notes to the accompanying consolidated financial statements. The table reflects the fair value amount in accordance with ASC Topic 718. | |
| (4) | The table reflects consulting fees paid to directors. | |
| (5) | As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 125,000 shares | |
| (6) | As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 62,500 shares. | |
| (7) | “All Other Compensation” includes $12,500 for consulting services performed by Ms. Sen for us during 2020. As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 62,500 shares. | |
| (8) | As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 125,000 shares. | |
| (9) | As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 125,000 shares; and the aggregate shares of our common stock underlying the option awards in column (d) was 750,000 shares. | |
| (10) | All Other Compensation includes $120,000 for consulting services performed by Mr. Jacobs for us during 2020. As of December 31, 2020, the aggregate shares of our common stock underlying the stock awards in column (c) were 62,500 shares. |
Director Compensation Policies
On January 1, 2020, our Board approved and adopted the 2020 Outside Director Compensation Policy (the “January 2020 Compensation Policy”). The January 2020 Compensation Policy applied to non-employee directors (the “Outside Directors”), providing that the Outside Directors would be granted annually a restricted stock award of a number of shares of our common stock equal in value to $50,000. It also provided that any Outside Director who serves as the chairperson of one or more committees of our Board will be granted annually a restricted stock award of a number of shares of our common stock equal in value to $50,000. However, each Outside Director may only receive one award for their service as a chairperson, regardless of the number of committees chaired. The shares of our common stock underlying each award vests in 12 equal monthly installments.
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The 2020 Compensation Policy included annual cash compensation to each Outside Director of $25,000 and to the Chairman of our Board of $30,000, payable quarterly. However, on May 27, 2020, our Board approved and adopted a new 2020 Outside Director Compensation Policy (the “May 2020 Compensation Policy” and, together with the January 2020 Compensation Policy, the “2020 Compensation Policies”). The May 2020 Compensation Policy includes the same provisions of the January 2020 Compensation Policy, except that it removed the cash compensation to Outside Directors.
Potential Payments Upon Termination or Change-of-Control
Mr. Levinsohn
The Second A&R Employment Agreement provides for various termination events under which Mr. Levinsohn would be entitled to annual bonuses earned but not yet paid and salary continuation through December 31, 2023, or the end of any renewal term, if applicable, but in no event will he be eligible to less than twelve months of salary continuation and reimbursement of 18 consecutive months of COBRA costs. In addition, he would be entitled to the acceleration of vesting of outstanding equity awards.
Mr. Heckman
The Heckman Employment Agreement provided for various termination events under which he would have been entitled to one year’s severance equal to his annual salary amount. Subsequent to fiscal 2019, Mr. Heckman and we entered into a Separation Agreement, dated August 26, 2020, pursuant to which we agreed to hire Mr. Heckman as a consultant for a one-year period and pay him a monthly consulting fee of approximately $29,200 per month. The terms of the consulting arrangement were set forth in a separate consulting agreement. The consulting agreement was amended on June 3, 2021 to provide that Mr. Heckman would be paid approximately $57,895 per month through August 2022.
Mr. Kraft
The 2020 Kraft Employment Agreement provides for various termination events under which Mr. Kraft would be entitled to 50% of his annualized salary, his annual bonus based on 100% of goal attainment, payment for bonuses already earned, and immediate acceleration of the vesting of any unvested time or stock price target options. Effective January 1, 2021, the A&R Kraft Agreement provides for various termination events under which Mr. Kraft would be entitled to one year’s severance equal to his annual salary and bonus amounts based on achievement of 100% of his personal goals, which would be paid as salary continuation, and receive payment for earned businesses. Mr. Kraft would also be entitled to COBRA premiums and all outstanding unvested equity awards would become fully vested.
Mr. Zimak
The Zimak Employment Agreement provides for various termination events under which he would be entitled to salary continuance for the longer of (i) the remainder of the term of the Zimak Employment Agreement or (ii) one year following the date of the termination, and all of the shares of our common stock underlying the restricted stock units awarded to Mr. Zimak pursuant to the Zimak Employment Agreement. Effective January 1, 2021, the A&R Zimak Employment Agreement provides for various termination events under which Mr. Zimak would be entitled to salary continuation for up to one year.
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Outstanding Equity Awards at December 31, 2020
The following table provides information concerning options to purchase shares of our common stock held by the named executive officers on December 31, 2020.
Outstanding Equity Awards At Fiscal Year-End
| Option Awards | ||||||||||||||||||||
(a) Name | (b) Number of Securities Underlying Unexercised Options Exercisable | (c) Number of Securities Underlying Unexercised Options Unexercisable | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | (e) Option exercise price ($) | (f) Option expiration date | |||||||||||||||
| James C. Heckman | 1,687,500 | 562,500 | (1) | - | 0.56 | 9/12/2028 | ||||||||||||||
| James C. Heckman | - | 14,509,205 | (2) | - | 0.46 | 4/10/2029 | ||||||||||||||
| Ross Levinsohn | - | 532,004 | (3) | - | 0.46 | 4/10/2029 | ||||||||||||||
| Ross Levinsohn | 1,000,000 | 1,000,000 | (4) | - | 0.42 | 6/11/2029 | ||||||||||||||
| Ross Levinsohn | - | 2,000,000 | (5) | - | 0.81 | 9/16/2029 | ||||||||||||||
Avi Zimak | 375,000 | 750,000 | (6) | 0.77 | 12/2/2029 | |||||||||||||||
| Avi Zimak | - | 1,125,000 | (7) | 0.77 | 12/2/2029 | |||||||||||||||
Avi Zimak | 250,000 | - | (8) | - | 12/2/2029 | |||||||||||||||
Andrew Kraft | 1,000,000 | - | (9) | 0.35 | 12/13/2028 | |||||||||||||||
Andrew Kraft | 400,000 | - | 0.35 | 12/13/2028 | ||||||||||||||||
| Andrew Kraft | - | 1,354,193 | (10) | 0.46 | 4/10/2029 | |||||||||||||||
| (1) | As of December 31, 2020, the remaining option award will vest 1/36th over the next 10 months. On June 3, 2021, our Board approved the 2016 Amendment to the option award grant, which clarifies that the option qualifies as a non-statutory stock option and that it remains exercisable for the remainder of the term of the option. | |
| (2) | As of December 31, 2020, the shares of our common stock underlying the options were to vest one-third on the first anniversary of the grant date, with the remaining vesting monthly over the next two years, subject to certain stock price conditions. On June 3, 2021, our Board approved the 2019 Amendment to the option award grant, which changed the vesting schedule of the option to provide for an immediate vesting of 2,000,000 shares of our common stock underlying the options, with the remainder of the options being subject to performance-based vesting that is tied to the price of our common stock. | |
| (3) | As of December 31, 2020, the shares of our common stock underlying the options were to vest one-third on the first anniversary of the grant date, with the remaining vesting monthly over the next two years, subject to certain stock price conditions. On January 8, 2021, our Board approved an amendment to the option award grant, which eliminated the stock price conditions, therefore, the award continues to vest solely on the time vesting condition. | |
| (4) | The shares of our common stock underlying the options vest one-third on June 11, 2020, with the balance vesting monthly over the next 24 months. |
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| (5) | As of December 31, 2020, the shares of our common stock underlying the options were subject to revenue vesting conditions in addition to time vesting condition where one-third of the awards vests after one year of continuous service; with the balance vesting monthly when completes each month of continuous service. On January 8, 2021, our Board approved an amendment to the option award grant, which eliminated the revenue vesting conditions, therefore, the award continues to vest solely on the time vesting condition. | |
| (6) | The shares of our common stock underlying the options vest one-third on the first anniversary of the grant date, with the balance vesting monthly over the next 24 months. | |
| (7) | The shares of our common stock underlying the options are subject to revenue vesting conditions. On January 8, 2021, our Board approved an amendment to the option award grant, which eliminated the revenue vesting conditions, therefore, the award continues to vest solely on the time vesting condition. | |
| (8) | The shares of our common stock underlying the restricted stock units vest on the first anniversary of the grant date. | |
| (9) | On April 10, 2020, pursuant to the Kraft Separation Agreement, our Board approved an amendment to the option award grant which accelerated the vesting of the original option award from one-third on the first anniversary of the grant date, with the balance vesting monthly over the next 24 months to 750,000 options vested on such date with the balance vesting over the next 9 months. | |
| (10) | On April 10, 2020, pursuant to the Kraft Separation Agreement, our Board approved an amendment to the option award grant which permitted the award to be exercised under an option extension clause. As of December 31, 2020, the shares of our common stock underlying the options were to vest one-third on the first anniversary of the grant date, with the remaining vesting monthly over the next two years, subject to certain stock price conditions as provided in the original award agreement. On January 8, 2021, our Board approved an amendment to the option award grant, which eliminated the stock price conditions, therefore, the award continues to vest solely on the time vesting condition. |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Securities Authorized for Issuance Under Equity Compensation Plans
A summary of our securities authorized for issuance under equity compensation plans as of December 31, 2020 is as follows:
Equity Compensation Plan Information
| Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted
Average Exercise Price of Outstanding | (c) Number
of Securities Remaining Available | |||||||||
| Equity compensation plans approved by security holders | 88,964,651 | $ | 0.59 | 6,035,349 | ||||||||
| Equity compensation plans not approved by security holders | 25,831,385 | 0.59 | 1,210,459 | |||||||||
| Total | 114,796,036 | $ | 0.59 | 7,245,808 | ||||||||
Plans Adopted by Stockholders
2016 Stock Incentive Plan
On December 19, 2016, our Board approved the 2016 Plan. On June 28, 2017, our Board approved an increase in the number of shares of our common stock authorized for issuance under the 2016 Plan to 3,000,000 shares of our common stock. Our stockholders approved the 2016 Plan, as amended, on December 13, 2017. On March 28, 2018, our Board approved an increase in the number of shares of our common stock authorized to be issued pursuant to the 2016 Plan from 3,000,000 shares to 5,000,000. This increase in authorized shares was not approved by our stockholders. On August 23, 2018, our Board approved an increase in the number of shares of our common stock authorized for issuance under the 2016 Plan from 5,000,000 shares to 10,000,000 shares. This increase in the number of authorized shares was approved by our stockholders on April 3, 2020.
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The purpose of the 2016 Plan is to retain the services of our directors, employees, and consultants, align the interests of these individuals with the interests of our stockholders, and to serve as an aid and inducement in the hiring of new employees through awards of stock options, restricted stock awards, unrestricted stock awards, and performance stock awards (collectively, “Awards”).
Under the terms of the 2016 Plan, Awards to purchase up to 10,000,000 shares of our common stock may be granted to eligible participants. As of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued, 2,921,277 shares of our common stock remain available for issuance pursuant to the 2016 Plan. The 2016 Plan will terminate on December 19, 2026, unless previously terminated by our Board. The 2016 Plan is administered by our Board, or any committee of directors designated by our Board and their respective delegates, as described in the 2016 Plan.
The 2016 Plan provides that, if and to the extent that the aggregate fair market value of the shares with respect to which the incentive stock options (intended to qualify as such within the meaning of Section 422 of the Internal Revenue Code, the “Incentive Stock Options” are exercisable for the first time by the recipient during any calendar year (under all our plans and any of our subsidiaries’ plans) exceeds U.S. $100,000, such options will be treated as nonqualified stock options under the 2016 Plan. Options granted under the 2016 Plan become exercisable and expire as determined by our Board or committee, as applicable.
2019 Stock Incentive Plan
On April 4, 2019, our Board approved the 2019 Plan. On March 16, 2020, our Board approved an increase in the number of shares of our common stock authorized for issuance under the 2019 Plan to 85,000,000 shares of our common stock. Our stockholders approved the 2019 Plan, as amended, on April 3, 2020. On February 18, 2021, our Board approved an increase in the number of shares of our common stock authorized for issuance under the 2019 Plan to 185,000,000 shares of our common stock.
The purpose of the 2019 Plan is to retain the services of our directors, employees, and consultants and align the interests of these individuals with the interests of our stockholders through awards of stock options, restricted stock awards, unrestricted stock awards, and stock appreciation rights (collectively, “2019 Plan Awards”).
Under the terms of the 2019 Plan, 2019 Plan Awards to purchase up to 185,000,000 shares of our common stock may be granted to eligible participants. As of the issuance date of our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued, 24,647,216 of shares of our common stock remain available for issuance pursuant to the 2019 Plan. The 2019 Plan will terminate on April 4, 2029, unless previously terminated by our Board. The 2019 Plan is administered by our Board, or any committee of directors designated by our Board and their respective delegates, as described in the 2019 Plan.
The 2019 Plan also provides that, if and to the extent that the aggregate fair market value of the shares with respect to which incentive stock options are exercisable for the first time by the recipient during any calendar year (under all our plans and any of our subsidiaries’ plans) exceeds U.S. $100,000, such options will be treated as nonqualified stock options under the 2019 Plan. Options granted under the 2019 Plan become exercisable and expire as determined by our Board or committee, as applicable.
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Plans Adopted Without Approval of Security Holders
Publisher Partner Warrant Program
We operate and continue to develop an exclusive network of professionally managed online media channels, with an underlying technology platform. Each channel is operated by an invitation-only Publisher Partner. On December 19, 2016, as amended on August 23, 2017, and August 23, 2018, our Board approved the Channel Partner Warrant Program (the “Publisher Partner Warrant Program”) to be administered by management that authorized us to grant to certain of the Publisher Partners, Publisher Partner Warrants (the “Publisher Partner Warrants”) to purchase up to 2,000,000 shares of our common stock pursuant to the Publisher Partner Warrant Program. The Publisher Partner Warrant Program was intended to provide equity incentive to the Publisher Partners to motivate and reward them for their services to us and to align the interests of the Publisher Partners with those of our stockholders. The Publisher Partner Warrants had certain performance conditions. Pursuant to the terms of the Publisher Partner Warrants, we would notify the respective Publisher Partner of the number of shares earned, with one-third of the earned shares vesting on the notice date, one-third of the earned shares vesting on the first anniversary of the notice date, and the remaining one-third of the earned shares vesting on the second anniversary of the notice date. The Publisher Partner Warrants had a term of five years from issuance and could also be exercised on a cashless basis. Performance conditions are generally based on the average of number of unique visitors on the channel operation by the Publisher Partner generated during the six-month period from the launch of the Publisher Partner’s operations on our platform or the revenue generated during the period from the issuance date through a specified end date.
During fiscal 2018, we issued Publisher Partner Warrants to 14 Publisher Partners that were exercisable for up to 295,000 shares of our common stock, in the aggregate. The Publisher Partner Warrants vest over three years, have a per share exercise price ranging from $1.32 to $2.25, with a weighted average price of $1.74, and expire five years from the issuance date. In addition to the three-year vesting condition, the Publisher Partner Warrants have performance conditions that determine how many shares of our common stock underlying the Publisher Partner Warrants are earned. As of December 31, 2019, Publisher Partner Warrants exercisable for up to 1,017,140 shares were earned and remained outstanding (after taking into consideration forfeitures), and 613,041 were vested and exercisable.
In the aggregate, as of December 31, 2020, Publisher Partner Warrants exercisable for up to 789,541 shares of our common stock were earned and remained outstanding, of which 463,041 were vested and exercisable. As of the date our accompanying consolidated financial statements for the year ended December 31, 2020 were issued or were available to be issued, 1,210,459 of shares of our common stock remain available for issuance pursuant to the Publisher Partner Warrant Program.
On March 10, 2019, our Board terminated the initial Publisher Partner Warrant Program, and approved the “second” Publisher Partner Warrant Program, that authorized us to grant Publisher Partner Warrants to purchase up to 5,000,000 shares of our common stock. Such Publisher Partner Warrants were to be issued with the same terms as the first Publisher Partner Warrant Program, except that the shares of our common stock underlying these Publisher Partner Warrants are earned and vest over three years and have a five-term.
On May 20, 2020, our Board terminated the second Publisher Partner Warrant Program, and approved the “third” Publisher Partner Warrant Program, that authorized us to grant Publisher Partner Warrants to purchase up to 5,000,000 shares of our common stock. Such Publisher Partner Warrants granted under the third Publisher Partner Warrant Program were to be issued with the same terms as the second Publisher Partner Warrant Program, except that any Publisher Partner Warrants issued under the third Publisher Partner Warrant Program are no longer subject to performance conditions.
Outside Options
During fiscal 2018, our Board approved the granting of options outside of the 2016 Plan (the “Outside Options”) to certain officers, directors and employees to provide equity incentive in exchange for consideration in the form of services to us. The Outside Options are exercisable for shares of our common stock. During 2018 and 2019, our Board granted Outside Options exercisable for up to 2,414,000 and 1,500,000, respectively, shares of our common stock. The Outside Options either vest upon the passage of time or are tied to the achievement of certain performance targets. On January 8, 2021, our Board approved an amendment to the Outside Option award grants, which eliminated the certain performance targets, therefore, the awards continue to vest solely on the time vesting condition.
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Warrants
On June 14, 2019, our Board approved the grant of the warrants to acquire up to 21,989,844 shares our common stock to ABG in connection with the Sports Illustrated Licensed Brands. Half the warrants have an exercise price of $0.42 per share (the “Forty-Two Cents Warrants”). The other half of the warrants have an exercise price of $0.84 per share (the “Eighty-Four Cents Warrants”). The warrants provide for the following: (1) 40% of the Forty-Two Cents Warrants and 40% of the Eighty-Four Cents Warrants will vest in equal monthly increments over a period of two years beginning on the one-year anniversary of the date of issuance of the warrants (any unvested portion of such warrants to be forfeited by ABG upon certain terminations by us of the Sports Illustrated Licensing Agreement); (2) 60% of the Forty-Two Cents Warrants and 60% of the Eighty-Four Cents Warrants will vest based on the achievement of certain performance goals for the Sports Illustrated Licensed Brands in calendar years 2020, 2021, 2022, or 2023; (3) under certain circumstances we may require ABG to exercise all (and not less than all) of the warrants, in which case all of the warrants will be vested; (4) all of the warrants will automatically vest upon certain terminations of the Licensing Agreement by ABG or upon a change of control of us; and (5) ABG will have the right to participate, on a pro-rata basis (including vested and unvested warrants, exercised or unexercised), in any of our future equity issuances (subject to customary exceptions). Pursuant to the SI Fourth Amendment, the exercise price of fifty percent (50%) of the Eighty-Four Cents Warrants was changed to $0.42 per share in exchange for additional benefits under the Sports Illustrated Licensing Agreement.
Security Ownership of Certain Beneficial Owners and Management
Common Stock
The following table sets forth information regarding beneficial ownership of our common stock as of August 12, 2021: (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by our current directors (as of August 12, 2021) and our “named executive officers” (as determined as of December 31, 2020); and (iii) by all of our current directors and executive officers as a group (as of August 12, 2021).
| Name and Address of Beneficial Owner * | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||||||
| Five Percent Stockholders: | ||||||||
| B. Riley FBR, Inc. (3) | 79,055,072 | 30.01 | % | |||||
| 180 Degree Capital Corp. (4) | 22,931,250 | 8.57 | % | |||||
| Warlock Partners, LLC (5) | 29,782,316 | 11.31 | % | |||||
| Athletes First Media LLC (6) | 15,000,000 | 5.69 | % | |||||
| TCS Capital Management LLC | 20,714,286 | 7.86 | % | |||||
| Directors and Named Executive Officers: | ||||||||
| James Heckman (7) | 10,810,931 | 4.00 | % | |||||
| Ross Levinsohn (8) | 5,915,428 | 2.21 | % | |||||
| John Fichthorn (9) | 2,552,795 | ** | ||||||
| Todd Sims (10) | 878,116 | ** | ||||||
| B. Rinku Sen (11) | 325,938 | ** | ||||||
| Peter Mills (12) | 853,542 | ** | ||||||
| Carlo Zola (13) | 29,823,395 | 11.32 | % | |||||
| Daniel Shribman (14) | 41,079 | ** | ||||||
| Andrew Kraft (15) | 2,528,494 | ** | ||||||
| Avi Zimak (16) | 1,375,000 | ** | ||||||
| Total Executive Officers and Directors, as a group (13 persons) | 51,014,101 | 18.28 | % | |||||
| * | The address for each person listed above is 225 Liberty Street, 27th Floor, New York, New York 10281, unless otherwise indicated. |
| ** | Less than 1.0%. |
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| (1) | Unless otherwise indicated, each person has sole investment and voting power with respect to the shares indicated, subject to community property laws, where applicable. Includes any securities that such person has the right to acquire within sixty (60) days of August 12, 2021 pursuant to options, warrants, conversion privileges, or other rights. |
| (2) | Based on 263,441,879 shares of our common stock issued and outstanding, plus the number of shares each person has the right to acquire within sixty (60) days of August 12, 2021. |
| (3) | Shares of our common stock beneficially owned consist of 79,048,002 shares. Shares of our common stock beneficially owned does not consist of (i) 10,200,000 shares issuable upon conversion of 3,366 shares of Series H Preferred Stock; and (ii) 875,000 shares of our common stock issuable upon the exercise of warrants. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock and warrants are subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock or exercise the warrants that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (4) | Shares of our common stock beneficially owned consist of 18,931,250 shares. Shares of our common stock beneficially owned does not consist of 4,000,000 shares issuable upon conversion of 1,320 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (5) | Shares of our common stock beneficially owned consist of 29,782,316 shares. Shares of our common stock beneficially owned does not consist of 6,666,667 shares issuable upon conversion of 2,200 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (6) | Shares of our common stock beneficially owned consist of 15,000,000 shares. |
| (7) | Shares of our common stock beneficially owned consist of: (i) 4,144,708 shares; (ii) 2,250,000 shares of issuable upon the exercise of vested options issued under the 2016 Plan; (iii) 2,025,314 shares issuable upon the exercise of vested options issued under the 2019 Plan; and (iv) 2,390,909 shares issuable upon conversion of 789 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (8) | Shares of our common stock beneficially owned consist of: (i) 1,245,434 shares; (ii) 4,063,933 shares issuable upon the exercise of vested options issued under the 2019 Plan and (iii) 606,061 shares issuable upon conversion of 200 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (9) | Shares of our common stock beneficially owned consist of: (i) 2,177,795 shares; (ii) 375,000 shares of our common stock issuable upon the vesting of restricted stock units; and (iii) 166,667 shares of our common stock granted under restricted stock awards, of which 125,000 shares of our common stock have vested (remaining shares will vest 1/12 on a monthly basis). |
| (10) | Shares of our common stock beneficially owned consist of (i) 878,116 shares; and (ii) 166,667 shares of our common stock granted under restricted stock awards, of which 125,000 shares of our common stock have vested (remaining shares will vest 1/12 on a monthly basis). |
| (11) | Shares of our common stock beneficially owned consist of: (i) 269,231 shares; (ii) 457 shares of our common stock issuable upon the exercise of warrants; (iii) 56,250 shares of our common stock issuable upon the exercise of vested options issued under the 2016 Plan; and (iv) 83,333 shares of our common stock granted under restricted stock awards, of which 62,500 shares of our common stock have vested (remaining shares will vest 1/12 on a monthly basis). |
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| (12) | Shares of our common stock beneficially owned consist of: (i) 674,792 shares; (ii) 78,750 shares of our common stock issuable upon the exercise of vested options issued under 2016 Plan; (iii) 166,667 shares of our common stock granted under restricted stock awards, of which 125,000 shares of our common stock have vested (with the remaining shares vesting 1/12 on a monthly basis) and (iv) 100,000 shares of our common stock issuable upon the conversion of 33 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (13) | Shares of our common stock beneficially owned consist of (i) 29,782,316 shares held by Warlock Partners, LLC, a company for which Mr. Zola serves as the managing member and (ii) 41,079 shares of our common stock granted under a restricted stock award, of which 23,474 shares of our common stock have vested (with the remaining shares vesting 1/7 on a monthly basis). Shares of our common stock beneficially owned does not consist of 6,666,667 shares issuable upon conversion of 2,200 shares of Series H Preferred Stock. Each share of Series H Preferred Stock has voting rights equivalent to the number of shares of our common stock on an as-converted basis. Our Series H Preferred Stock is subject to a “conversion block”, such that the holder cannot convert any portion of our Series H Preferred Stock that would result in the holder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our common stock following such conversions (which “conversion block” can be increased to 9.99% upon at least 61 days’ prior written notice to us). |
| (14) | Shares of our common stock beneficially owned consist of 41,079 shares of our common stock granted under a restricted stock award, of which 23,474 shares of our common stock have vested (with the remaining shares vesting 1/7 on a monthly basis). |
| (15) | Shares of our common stock beneficially owned consist of: (i) 1,128,494 shares of our common stock issuable upon the exercise of vested options issued under the 2019 Plan; and (ii) 1,400,000 shares of our common stock issuable upon the exercise of vested options from the Outside Plan. |
| (16) | Shares of our common stock beneficially owned consist of 1,375,000 shares of issuable upon the exercise of vested options issued under the 2019 Plan. |
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Series H Preferred Stock
The following table sets forth information regarding beneficial ownership of the Series H Preferred Stock as of August 12, 2021, (i) by each person who is known by us to beneficially own more than 5% of the Series H Preferred Stock; (ii) by our current directors (as of August 12, 2021) and our “named executive officers” (determined as of December 31, 2020); and (iii) by all of our current directors and executive officers as a group (as of August 12, 2021). The information reflects beneficial ownership, as determined in accordance with the SEC’s rules and are based on 19,597 shares of our Series H Preferred Stock issued and outstanding as of August 12, 2021.
| Name and Address of Beneficial Owner * | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| Five Percent Stockholders: | ||||||||
| Mark E. Strome | 6,425 | 32.79 | % | |||||
| B. Riley FBR, Inc. | 3,366 | 17.18 | % | |||||
| 180 Degree Capital Corp. | 1,320 | 6.74 | % | |||||
| Warlock Partners LLC | 2,200 | 11.23 | % | |||||
| Directors and Named Executive Officers | ||||||||
| James Heckman | 789 | 4.03 | % | |||||
| Ross Levinsohn (1) | 200 | 1.02 | % | |||||
| John Fichthorn | - | - | ||||||
| Todd Sims | - | - | ||||||
| B. Rinku Sen | - | - | ||||||
| Peter Mills | 33 | ** | ||||||
| Carlo Zola (2) | 2,200 | 11.23 | % | |||||
| Daniel Shribman | - | - | ||||||
| Andrew Kraft | - | - | ||||||
| Avi Zimak | - | - | ||||||
| Total Executive Officers and Directors, as a group (13 persons) | 2,433 | 14.65 | % | |||||
| * | The address for each person listed above is 225 Liberty Street, 27th Floor, New York, New York 10281, unless otherwise indicated. |
| ** | Less than 1.0%. |
| (1) | Mr. Levinsohn invested $200,000 into the Heckman Maven Investment Fund, L.P. (the “Fund”), an owner of shares of the Series H Preferred Stock. Mr. Levinsohn’s ownership in the Fund resulted in him beneficially owning approximately 200 shares of Series H Preferred Stock. |
| (2) | Shares of the Series H Preferred Stock beneficially owned consist of 2,200 shares held by Warlock Partners, LLC, a company for which Mr. Zola serves as the managing member. |
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Series I Preferred Stock, Series J Preferred Stock, and Series K Preferred Stock
On December 18, 2020, we filed the Certificate of Amendment, which increased our authorized shares of common stock. All of the then-outstanding shares of Series I Preferred Stock, Series J Preferred Stock, and Series K Preferred Stock automatically converted into shares of our common stock. Accordingly, as of December 18, 2020, we no longer have any issued and outstanding shares of Series I Preferred Stock, Series J Preferred Stock, and Series K Preferred Stock
Item 13. Certain Relationships and Related Transactions, and Director Independence
Financings
On March 24, 2020, we entered into the Second A&R NPA with an affiliated entity of B. Riley, in its capacity as agent and a purchaser. Pursuant to the Second A&R NPA, we issued the Term Note, in the aggregate principal amount of $12,000,000 to the purchaser. Up to $8,000,000 in principal amount under the Term Note is due on March 31, 2021, with the balance thereunder due on June 14, 2022. Interest on amounts outstanding under the Term Note are payable in-kind in arrears on the last day of each fiscal quarter. On March 25, 2020, we drew down $6,913,865 under the Term Note, and after payment of commitment and funding fees paid to BRF Finance in the amount of $793,109, and other legal fees and expenses of BRF Finance that we paid, we received net proceeds of approximately $6,000,000. Pursuant to Amendment 1 to the Second A&R NPA, dated October 23, 2020, interest payable on the notes on September 30, 2020, December 31,2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts can be converted into shares of our common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments. In addition, $3,367,090, including $3,295,506 of principal amount of the Term Note and $71,585 of accrued interest, was converted into shares of our Series K Preferred Stock and the maturity date of the Term Note was changed from March 31, 2021 to March 31, 2022. John A. Fichthorn, the Executive Chairman, served as Head of Alternative Investments for B. Riley Capital Management, a wholly owned subsidiary of B. Riley. Todd Sims, one of our directors, has served as the President of BRVC, a wholly owned subsidiary of B. Riley since October 2020. B. Riley FBR and its affiliates also beneficially owns more than 10% of our common stock.
Between August 14, 2020 and August 20, 2020, we entered into several securities purchase agreements for the sale of Series H Preferred Stock with certain accredited investors, including, among others, Strome and Strome Alpha Fund, L.P. (“Strome Alpha”), affiliates of Mark Strome, who previously beneficially owned more than 10% of the shares of our common stock and currently beneficially owns more than 10% of the shares of our Series H Preferred Stock, pursuant to which we issued an aggregate of 2,253 shares, at a stated value of $1,000 per share, initially convertible into 6,825,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of $2,730,000 for working capital and general corporate purposes. B. Riley FBR, acting as a placement agent for these issuances, waived its fee for these services and was reimbursed for certain legal and other costs. On October 28, 2020, we entered into a mutual rescission agreement with Strome and Strome Alpha, pursuant to which the stock purchase agreements entered into by Strome and Strome Alpha between August 14, 2020 and August 20, 2020 were rescinded and deemed null and void.
On September 4, 2020, we entered into a securities purchase agreement with certain accredited investors, pursuant to which we issued an aggregate of 10,500 shares of our Series J Preferred Stock at a stated value of $1,000, initially convertible into shares of our common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of $6,000,000. Of the shares of Series J Preferred Stock issued, B. Riley Securities, Inc., an affiliate of B. Riley, purchased 5,250 shares, and B&W Pension Trust, of which 180 Degree Capital Corp. is the Investment Adviser, purchased 5,250 shares. B. Riley FBR, acting as placement agent for these issuances, waived its fee for these services and was reimbursed for certain legal and other costs. B. Riley FBR and its affiliates also beneficially owns more than 10% of our common stock.
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Between October 23, 2020 and November 11, 2020, we entered into several securities purchase agreements with accredited investors, pursuant to which we issued an aggregate of 18,042 shares of Series K Preferred Stock at a stated value of $1,000 per share, initially convertible into 45,105,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of $18,042,090. Between October 23, 2020 and November 11, 2020, we entered into several securities purchase agreements with accredited investors, pursuant to which we issued an aggregate of 18,042 shares of Series K Preferred Stock at a stated value of $1,000 per share, initially convertible into 45,105,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of $18,042,090. B. Riley FBR, acting as a placement agent for these issuances, was paid in cash $520,500 for its services and reimbursed for certain legal and other costs. John A. Fichthorn, the Executive Chairman, served as Head of Alternative Investments for B. Riley Capital Management, a wholly owned subsidiary of B. Riley. Todd Sims, one of our directors, has served as the President of BRVC, a wholly owned subsidiary of B. Riley since October 2020. B. Riley FBR and its affiliates also beneficially owns more than 10% of our common stock.
On May 20 and 25, 2021, and June 2, 2021, we entered into several securities purchase agreements with accredited investors, pursuant to which we issued an aggregate of 28,588,575 shares of our common stock, at a per share price of $0.70, for aggregate gross proceeds of approximately $20.0 million in a private placement. Among the investors were B. Riley, or its affiliates, Warlock, and TCS Capital Management. John A. Fichthorn, our Executive Chairman, previously served as Head of Alternative Investments of B. Riley Capital Management, a wholly owned subsidiary of B. Riley, Todd Sims, one of our directors, has served as the President of BRVC, a wholly-owned subsidiary of B. Riley since October 2020, and Dan Shribman, one of our directors, currently serves as Chief Investment Officer of B. Riley and President of its B. Riley Principal Investments subsidiary. Carlo Zola, one of our directors, serves as a principal of Warlock. Finally, Eric Semler, who at the time of the investment, was one of our directors, is the Managing Member of TCS Capital Management.
Cramer Agreement
On August 7, 2019, in connection with TheStreet Merger, we entered into the Cramer Agreement with Mr. Cramer, pursuant to which Mr. Cramer and Cramer Digital agreed to provide the Cramer Services. In consideration for the Cramer Services, we pay Cramer Digital the Revenue Share. In addition, we pay Cramer Digital $3,250,000 as an annualized guarantee payment in equal monthly draws, recoupable against the Revenue Share. We also issued two options to Cramer Digital pursuant to our 2019 Plan. The first option was to purchase up to two million shares of our common stock at an exercise price of $0.72, the closing stock price on August 7, 2019, the grant date. This option vests over 36 months. The second option was to purchase up to three million shares of our common stock at an exercise price of $0.54, the closing stock price on April 21, 2020, the grant date. In the event Cramer Digital and we agree to renew the term of the Cramer Agreement for a minimum of three years from the end of the second year of the current term, 900,000 shares will vest on the Trigger Date. The remaining shares will vest equally on the 12-month anniversary of the Trigger Date, the 24-month anniversary of the Trigger Date, and the 36-month anniversary of the Trigger Date. In addition, we provide Cramer Digital with a marketing budget, access to personnel and support services, and production facilities. Finally, the Cramer Agreement provides that we will reimburse fifty percent of the cost of the rented office space by Cramer Digital, up to a maximum of $4,250 per month. On April 6, 2021, Cramer Digital notified us that it would cancel the optional third year of the term of the Cramer Agreement and we and Cramer Digital commenced negotiation of a new contract. On August 7, 2021, we entered into an extension of the Cramer Agreement to provide Mr. Cramer's services through September 30, 2021. Further, we are in discussions about an ongoing relationship.
Other Agreements
On May 1, 2020, Josh Jacobs and we entered into a Strategic Financing Addendum (the “Addendum”) to his Director Agreement dated January 1, 2020 (the “Jacobs Director Agreement”). Pursuant to the Addendum, Mr. Jacobs agreed to provide additional services to us in exchange for compensation in the amount of $20,000 per month. The services to be provided was again amended in July 2020. During fiscal 2020, we paid Mr. Jacobs $120,000 for these services.
On August 26, 2020, Maven Coalition entered into a consulting agreement with James C. Heckman, our former Chief Executive Officer pursuant to which Maven Coalition agreed to pay to Mr. Heckman a monthly fee of approximately $29,167 (to be increased to approximately $35,417 once our senior executive officer salaries are returned to the levels in place prior to March 2020). Mr. Heckman is also entitled to bonus payments of up to one hundred percent of the monthly fees payable in the then-current year upon satisfaction of certain performance goals. Mr. Heckman may also be awarded additional equity incentive awards. The initial term of the consulting agreement commenced on August 26, 2020 and ends on August 26, 2021, which term may be extended for an additional 12-month period unless our then-Chief Executive Officer notifies Mr. Heckman of a decision not to extend at least 90 days in advance. On June 3, 2021, Maven Coalition and Mr. Heckman amended and restated the consulting agreement to provide that Mr. Heckman would be paid approximately $57,895 per month from February 2021 through August 2022 in exchange for certain strategic advisory services provided by Mr. Heckman to Maven Coalition. The terms of the Heckman Amendment are conditioned upon the execution of a mutual release by Mr. Heckman, Maven Coalition, Maven Media, TheStreet, and Heckman Media, LLC.
Effective September 4, 2020, we entered into a separation and advisory agreement with William Sornsin, who served as our Chief Operating Officer from January 2020 until September 2020, pursuant to which we agree to pay him salary continuation in the amount of $275,000, which is the equivalent of one full year of Mr. Sornsin’s salary as of the date of the separation. Pursuant to the Sornsin Separation Agreement, we will continue to pay Mr. Sornsin a consulting fee of $100 per hour of consulting services performed.
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On October 5, 2020, we entered into a separation agreement with Benjamin Joldersma, who served as our Chief Technology Officer from November 2016 through September 2020, pursuant to which we agreed to pay him approximately $111,000 as a severance payment, as well as any COBRA premiums.
Repurchases
On December 15, 2020, we entered into the Fourth Amendment, pursuant to which we agreed to repurchase from certain key personnel of HubPages, including Paul Edmondson, one of our officers, and his spouse, an aggregate of approximately 16,802 shares of our common stock at a price of $4 per share each month for a period of 24 months, for aggregate proceeds to Mr. Edmondson and his spouse of approximately $67,207 per month.
Officer Promissory Notes
In May 2018, our then Chief Executive Officer began advancing funds to us in order to meet minimum operating needs. Such advances were made pursuant to promissory notes that were due on demand, with interest at the minimum applicable federal rate, which ranged from 2.18% to 2.38%. As of December 31, 2019, the total principal amount of advances outstanding were $319,351 (including accrued interest of $12,574). On October 31, 2020, we entered into an Exchange Agreement with Mr. Heckman pursuant to which he converted the outstanding principal amount due, together with accrued but unpaid interest under the promissory notes, into 389 shares of our Series H Preferred Stock. Nothing was outstanding as of December 31, 2020.
Director Independence
As of December 31, 2020, our Board was composed of seven persons – Ross Levinsohn, John Fichthorn, Peter Mills, Todd Sims, B. Rinku Sen, David Bailey, and Joshua Jacobs. We do not have securities listed on a national securities exchange or in an inter-dealer quotation system that has director independence or committee independence requirements. Accordingly, we are not required to comply with any director independence requirements.
Notwithstanding the foregoing lack of applicable independence requirements, as of December 31, 2020, our Board had four members that qualified as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Exchange Act and Rule 5605 of The Nasdaq Stock Market Listing Rules.
Based upon all facts and circumstances our Board deemed relevant in determining their independence, our Board has determined that Mr. Peter B. Mills, Mr. John Fichthorn, Mr. Todd Sims, and Ms. B. Rinku Sen are all independent, and do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our Board has determined that Mr. Ross Levinsohn, by virtue of his position as our Chief Executive Officer, as well as Mr. Joshua Jacobs, by virtue of his position as our President from January 1, 2018 through October 1, 2019, were not independent during fiscal 2020. Our Board also determined that Mr. David Bailey, by virtue of his affiliation with BTC Inc. and his affiliation with other related parties, was not independent during fiscal 2020.
Since the end of 2020, Mr. Bailey and Mr. Jacobs resigned as directors. Carlo Zola and Dan Shribman joined our Board as directors in June 2021. Based on Rule 5606 of The Nasdaq Stock Market Listing Rules, we believe that both directors are independent.
In making the determinations discussed above, our Board considered information requested from and provided by each director concerning his or her background, employment, affiliations, family relationships. Our Board also considered the current and prior relationships that each non-employee director had with our Company, including the relationship of certain of our directors with certain of our significant stockholders, B. Riley and Warlock.
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Item 14. Principal Accountant Fees and Services
The following table sets forth the aggregate fees billed and incurred to both us or our subsidiaries by our independent registered public accounting firm for the years ended December 31, 2020 and 2019 for professional services by Marcum.
| Category | 2020 (1) | 2019 (2) | ||||||
| Audit Fees | $ | 600,000 | $ | 1,223,979 | ||||
| Audit-related Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Tax Fees | 20,600 | 69,165 | ||||||
| $ | 620,600 | $ | 1,293,144 | |||||
| (1) | These fees were incurred during fiscal 2020 and 2021 in connection with the audit fees related to the audit for our year ended December 31, 2020 and review of our financial statements for certain of the fiscal 2020 interim periods, as well as tax fees for certain tax compliance services provided for fiscal 2020. |
| (2) | These fees were incurred during fiscal 2020 and 2021 in connection with the audit fees related to the audit for our year ended December 31, 2019 and review of our financial statements for certain of the fiscal 2019 interim periods, as well as tax fees for certain tax compliance services provided for fiscal 2019. |
Audit Fees
We paid or incurred audit fees to Marcum of $600,000 and $1,223,979 for professional services rendered for the audit of our annual financial statements for the years ended December 31, 2020 and 2019, respectively, and for review of our financial statements included in the comprehensive Form 10-K we filed, which included the quarterly financial statements for fiscal 2019, and for review of our 2020 quarterly reports on Form 10-Q for the first, second, and third quarters of fiscal 2020.
Audit-related Fees
Marcum did not provide any services not disclosed in the table above during fiscal 2020 and 2019. As a result, there were no audit-related fees billed or paid during fiscal 2020 and 2019.
All Other Fees
Marcum did not provide any services not disclosed in the table above during fiscal 2020 and 2019. As a result, there were no other fees billed or paid during fiscal 2020 and 2019.
Tax Fees
Marcum provided professional services for tax compliance for fiscal 2020 and 2019 and was paid $20,600 and $69,165, respectively.
Pre-Approval Policies and Procedures
Our Audit Committee has considered the nature and amount of fees billed by our independent registered public accounting firms and believe that the provision of services for activities to the audit is in compliance with maintaining their respective independence.
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All audit fees are approved by the Audit Committee of our Board. The Audit Committee reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-related Fees,” “All Other Fees,” and “Tax Fees,” as applicable, were pre-approved by our Audit Committee. The Audit Committee may not engage the independent auditors to perform the non-audit services proscribed by law or regulations.
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this Annual Report: |
1. Index to Consolidated Financial Statements. Our consolidated financial statements and the Report of Marcum LLP, Independent Registered Public Accounting Firms are included in Part IV of this Annual Report on the pages indicated:
2. Financial Statement Schedules. Reference is made to the Financial Statements filed under Item 8, Part II of this Annual Report.
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| 77 |
| 78 |
| 79 |
| 80 |
| 81 |
| 82 |
| 83 |
| 101.INS XBRL* | Instance Document. | |
| 101.SCH XBRL* | Taxonomy Extension Schema Document. | |
| 101.CAL XBRL* | Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF XBRL* | Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB XBRL* | Taxonomy Extension Label Linkbase Document. | |
| 101.PRE XBRL* | Taxonomy Presentation Linkbase Document. |
| * | Filed Herewith |
| + | Employment Agreement |
| (b) | Exhibits. See Item 15(a) above. |
Item 16. Form 10–K Summary
None.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TheMaven, Inc. | ||
| Dated: August 16, 2021 | By: | /s/ Ross Levinsohn |
Ross Levinsohn Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Douglas B. Smith | |
Douglas B. Smith Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated and on the dates indicated.
| Signature | Title | |
| /s/ ROSS LEVINSOHN | Chief Executive Officer and Director | |
| Ross Levinsohn | (Principal Executive Officer) | |
| Date: August 16, 2021 | ||
| /s/ DOUGLAS B. SMITH | Chief Financial Officer | |
| Douglas B. Smith | (Principal Financial and Accounting Officer) | |
| Date: August 16, 2021 | ||
| /s/ JOHN A. FICHTHORN | Executive Chairman and Director | |
| John A. Fichthorn | ||
| Date: August 16, 2021 | ||
| /s/ CARLO ZOLA | Director | |
| Carlo Zola | ||
| Date: August 16, 2021 | ||
| /s/ PETER B. MILLS | Director | |
| Peter B. Mills | ||
| Date: August 16, 2021 | ||
| /s/ B. RINKU SEN | Director | |
| B. Rinku Sen | ||
| Date: August 16, 2021 | ||
| /s/ DANIEL SHRIBMAN | Director | |
| Daniel Shribman | ||
| Date: August 16, 2021 | ||
| /s/ TODD D. SIMS | Director | |
| Todd D. Sims | ||
| Date: August 16, 2021 |
| 85 |
TheMaven, Inc. and Subsidiaries
Index to Consolidated Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
TheMaven, Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of TheMaven, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ deficiency and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the Contract Modification to Certain Subscription Contacts
As described in Note 2 to the consolidated financial statements, the Company modified certain digital and magazine subscription contracts. The Company determined that the contract modification was a termination of the existing contract and a creation of a new contract with each individual subscriber. The Company accounted for the contract modification on a prospective basis.
The principal consideration for our determination that performing procedures relating to these contract modifications is a critical audit matter, are there is significant audit judgment by management in determining the impact related to revenue recognition, contract assets and contract liabilities and classification of short-term and long-term presentation to the Company’s future period balance sheets.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. The procedures included, amongst others, (i) gaining an understanding of the Company’s estimation process related to contract modification (ii) testing the number of future unserved subscription copies at the contract modification date to estimate the financial impact of the contract modification to both the current period and future period earnings (iii) testing management’s analysis of the financial impact of the contract modification to contract asset and contract liabilities balances as of end of the year and the impact to current period earnings (iv) testing the mathematical accuracy of the analysis prepared by management (v) evaluating the appropriateness of the presentation to the consolidated financial statements.
| /s/ Marcum llp | |
| Marcum LLP |
We have served as the Company’s auditor since 2019.
Los Angeles, California
August 16, 2021
| F-2 |
THEMAVEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,033,872 | $ | 8,852,281 | ||||
| Restricted cash | 500,809 | 620,809 | ||||||
| Accounts receivable, net | 16,497,626 | 16,233,955 | ||||||
| Subscription acquisition costs, current portion | 28,146,895 | 3,142,580 | ||||||
| Royalty fees, current portion | 15,000,000 | 15,000,000 | ||||||
| Prepayments and other current assets | 4,667,263 | 4,310,735 | ||||||
| Total current assets | 73,846,465 | 48,160,360 | ||||||
| Property and equipment, net | 1,129,438 | 661,277 | ||||||
| Operating lease right-of-use assets | 18,292,196 | 3,980,649 | ||||||
| Platform development, net | 7,355,608 | 5,892,719 | ||||||
| Royalty fees, net of current portion | 11,250,000 | 26,250,000 | ||||||
| Subscription acquisition costs, net of current portion | 13,358,585 | 3,417,478 | ||||||
| Acquired and other intangible assets, net | 71,501,835 | 91,404,144 | ||||||
| Other long-term assets | 1,330,812 | 1,085,287 | ||||||
| Goodwill | 16,139,377 | 16,139,377 | ||||||
| Total assets | $ | 214,204,316 | $ | 196,991,291 | ||||
| Liabilities, mezzanine equity and stockholders’ deficiency | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,228,977 | $ | 9,580,186 | ||||
| Accrued expenses and other | 14,718,193 | 16,483,201 | ||||||
| Line of credit | 7,178,791 | - | ||||||
| Unearned revenue | 61,625,676 | 32,163,087 | ||||||
| Subscription refund liability | 4,035,531 | 3,144,172 | ||||||
| Operating lease liabilities | 1,059,671 | 2,203,474 | ||||||
| Liquidated damages payable | 9,568,091 | 8,080,514 | ||||||
| Convertible debt | - | 741,197 | ||||||
| Warrant derivative liabilities | 1,147,895 | 1,644,200 | ||||||
| Embedded derivative liabilities | - | 13,501,000 | ||||||
| Total current liabilities | 107,562,825 | 87,541,031 | ||||||
| Unearned revenue, net of current portion | 23,498,597 | 31,179,211 | ||||||
| Restricted stock liabilities, net of current portion | 1,995,810 | - | ||||||
| Operating lease liabilities, net of current portion | 19,886,083 | 2,616,132 | ||||||
| Other long-term liabilities | 753,365 | 242,310 | ||||||
| Deferred tax liabilities | 210,832 | - | ||||||
| Promissory notes, including accrued interest | - | 319,351 | ||||||
| Convertible debt, net of current portion | - | 12,497,765 | ||||||
| Long-term debt | 62,194,272 | 44,009,745 | ||||||
| Total liabilities | 216,101,784 | 178,405,545 | ||||||
| Commitments and contingencies (Note 26) | ||||||||
| Mezzanine equity: | ||||||||
| Series G redeemable and convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 1,800 shares designated; aggregate liquidation value: $168,496; Series G shares issued and outstanding: 168,496; common shares issuable upon conversion: 188,791 at December 31, 2020 and 2019 | 168,496 | 168,496 | ||||||
| Series H convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 23,000 shares designated; aggregate liquidation value: $19,597,000 and $19,399,250; Series H shares issued and outstanding: 19,597 and 19,400; common shares issuable upon conversion: 59,384,849 and 58,787,879 at December 31, 2020 and 2019, respectively | 18,247,496 | 18,045,496 | ||||||
| Series I convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 25,800 shares designated; aggregate liquidation value: $0 and $23,100,000 at December 31, 2020 and 2019, respectively; Series I shares issued and outstanding: 23,100; common shares issuable upon conversion: 46,200,000 at December 31, 2019 | - | 19,699,742 | ||||||
| Series J convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 25,000 shares designated; aggregate liquidation value: $0 and $20,000,000 at December 31, 2020 and 2019, respectively; Series J shares issued and outstanding: 20,000; common shares issuable upon conversion: 28,571,428 at December 31, 2019 | - | 17,739,996 | ||||||
| Total mezzanine equity | 18,415,992 | 55,653,730 | ||||||
| Stockholders’ deficiency: | ||||||||
| Common stock, $0.01 par value, authorized 1,000,000,000 shares; issued and outstanding: 229,085,167 and 37,119,117 shares at December 31, 2020 and 2019, respectively | 2,290,851 | 371,190 | ||||||
| Common stock to be issued | 10,809 | 39,383 | ||||||
| Additional paid-in capital | 139,658,166 | 35,562,766 | ||||||
| Accumulated deficit | (162,273,286 | ) | (73,041,323 | ) | ||||
| Total stockholders’ deficiency | (20,313,460 | ) | (37,067,984 | ) | ||||
| Total liabilities, mezzanine equity and stockholders’ deficiency | $ | 214,204,316 | $ | 196,991,291 | ||||
See accompanying notes to consolidated financial statements.
| F-3 |
THEMAVEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenue | $ | 128,032,397 | $ | 53,343,310 | ||||
| Cost of revenue (includes amortization for developed technology and platform development for 2020 and 2019 of $8,550,952 and $6,191,965, respectively) | 103,063,445 | 47,301,175 | ||||||
| Gross profit | 24,968,952 | 6,042,135 | ||||||
| Operating expenses | ||||||||
| Selling and marketing | 43,589,239 | 12,789,056 | ||||||
| General and administrative | 36,007,238 | 29,511,204 | ||||||
| Depreciation and amortization | 16,280,475 | 4,551,372 | ||||||
| Total operating expenses | 95,876,952 | 46,851,632 | ||||||
| Loss from operations | (70,908,000 | ) | (40,809,497 | ) | ||||
| Other (expenses) income | ||||||||
| Change in valuation of warrant derivative liabilities | 496,305 | (1,015,151 | ) | |||||
| Change in valuation of embedded derivative liabilities | 2,571,004 | (5,040,000 | ) | |||||
| Loss on conversion of convertible debt | (3,297,539 | ) | - | |||||
| Interest expense | (16,497,217 | ) | (10,463,570 | ) | ||||
| Interest income | 381,026 | 13,976 | ||||||
| Liquidated damages | (1,487,577 | ) | (728,516 | ) | ||||
| Other (expenses) income | (279,133 | ) | 262 | |||||
| Total other expenses | (18,113,131 | ) | (17,232,999 | ) | ||||
| Loss before income taxes | (89,021,131 | ) | (58,042,496 | ) | ||||
| Income taxes | (210,832 | ) | 19,541,127 | |||||
| Net loss | (89,231,963 | ) | (38,501,369 | ) | ||||
| Deemed dividend on convertible preferred stock | (15,642,595 | ) | - | |||||
| Net loss attributable to common stockholders | $ | (104,874,558 | ) | $ | (38,501,369 | ) | ||
| Basic and diluted net loss per common share | $ | (2.28 | ) | $ | (1.04 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted | 45,981,029 | 37,080,784 | ||||||
See accompanying notes to consolidated financial statements.
| F-4 |
THEMAVEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
Years Ended December 31, 2020 and 2019
| Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficiency | ||||||||||||||||||||||
| Balance at January 1, 2019 | 35,768,619 | $ | 357,685 | 5,127,167 | 51,272 | $ | 23,413,077 | $ | (34,539,954 | ) | $ | (10,717,920 | ) | |||||||||||||||
| Issuance of common stock in connection with the merger of Say Media | 1,188,880 | 11,889 | (1,188,880 | ) | (11,889 | ) | - | - | - | |||||||||||||||||||
| Cashless exercise of common stock warrants | 539,331 | 5,393 | - | - | 729,793 | - | 735,186 | |||||||||||||||||||||
| Forfeiture of restricted stock | (825,000 | ) | (8,250 | ) | - | - | 8,250 | - | - | |||||||||||||||||||
| Issuance of restricted stock awards to the board of directors | 833,333 | 8,333 | - | - | (8,333 | ) | - | - | ||||||||||||||||||||
| Cashless exercise of common stock options | 16,466 | 165 | - | - | (165 | ) | - | - | ||||||||||||||||||||
| Common stock withheld for taxes | (402,512 | ) | (4,025 | ) | - | (252,033 | ) | (256,058 | ) | |||||||||||||||||||
| Stock-based compensation | - | - | - | - | 11,672,177 | - | 11,672,177 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (38,501,369 | ) | (38,501,369 | ) | |||||||||||||||||||
| Balance at December 31, 2019 | 37,119,117 | $ | 371,190 | 3,938,287 | 39,383 | $ | 35,562,766 | $ | (73,041,323 | ) | $ | (37,067,984 | ) | |||||||||||||||
| Issuance of restricted stock units in connection with the acquisition of LiftIgniter | - | - | - | - | 500,000 | - | 500,000 | |||||||||||||||||||||
| Issuance of common stock in connection with the merger of Say Media | 2,857,357 | 28,574 | (2,857,357 | ) | (28,574 | ) | - | - | - | |||||||||||||||||||
| Forfeiture of restricted stock | (399,998 | ) | (4,000 | ) | - | - | 4,000 | - | - | |||||||||||||||||||
| Issuance of restricted stock awards to the board of directors | 562,500 | 5,625 | - | - | (5,625 | ) | - | - | ||||||||||||||||||||
| Issuance of common stock upon conversion of 12% convertible debentures | 53,887,470 | 538,875 | - | - | 20,863,613 | - | 21,402,488 | |||||||||||||||||||||
| Issuance of common stock upon conversion of related embedded derivative liabilities of 12% convertible debentures | - | - | - | - | 10,929,996 | - | 10,929,996 | |||||||||||||||||||||
| Issuance of common stock upon conversion of Series H convertible preferred stock | 909,090 | 9,091 | - | - | 290,909 | - | 300,000 | |||||||||||||||||||||
| Issuance of common stock upon conversion of Series I convertible preferred stock | 46,200,000 | 462,000 | - | - | 24,319,742 | - | 24,781,742 | |||||||||||||||||||||
| Issuance of common stock upon conversion of Series J convertible preferred stock | 43,584,500 | 435,845 | - | - | 23,890,696 | - | 24,326,541 | |||||||||||||||||||||
| Issuance of common stock upon conversion of Series K convertible preferred stock | 45,105,000 | 451,050 | - | - | 26,502,500 | - | 26,953,550 | |||||||||||||||||||||
| Reclassification of restricted stock awards and units from equity to liability classified upon modification | - | - | - | - | (3,800,734 | ) | - | (3,800,734 | ) | |||||||||||||||||||
| Common stock withheld for taxes | (746,813 | ) | (7,468 | ) | - | - | (512,976 | ) | - | (520,444 | ) | |||||||||||||||||
| Exercise of common stock options | 6,944 | 69 | - | - | 3,698 | - | 3,767 | |||||||||||||||||||||
| Deemed dividend on Series I convertible preferred stock | - | - | - | - | (5,082,000 | ) | - | (5,082,000 | ) | |||||||||||||||||||
| Deemed dividend on Series J convertible preferred stock | - | - | - | (586,545 | ) | - | (586,545 | ) | ||||||||||||||||||||
| Deemed dividend on Series K convertible preferred stock | - | - | - | - | (9,472,050 | ) | - | (9,472,050 | ) | |||||||||||||||||||
| Beneficial conversion feature on Series H convertible preferred stock | - | - | - | - | 502,000 | - | 502,000 | |||||||||||||||||||||
| Deemed dividend on Series H convertible preferred stock | - | - | - | - | (502,000 | ) | - | (502,000 | ) | |||||||||||||||||||
| Stock-based compensation | - | - | - | - | 16,250,176 | - | 16,250,176 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (89,231,963 | ) | (89,231,963 | ) | |||||||||||||||||||
| Balance at December 31, 2020 | 229,085,167 | $ | 2,290,851 | 1,080,930 | $ | 10,809 | $ | 139,658,166 | $ | (162,273,286 | ) | $ | (20,313,460 | ) | ||||||||||||||
See accompanying notes to consolidated financial statements.
| F-5 |
THEMAVEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (89,231,963 | ) | $ | (38,501,369 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | 638,796 | 276,791 | ||||||
| Amortization of platform development and intangible assets | 24,192,631 | 10,466,546 | ||||||
| Amortization of debt discounts | 6,607,212 | 4,545,675 | ||||||
| Change in valuation of warrant derivative liabilities | (496,305 | ) | 1,015,151 | |||||
| Change in valuation of embedded derivative liabilities | (2,571,004 | ) | 5,040,000 | |||||
| Loss on conversion of 12% convertible debentures | 3,297,539 | - | ||||||
| Accrued and noncash converted interest | 9,244,324 | 3,065,633 | ||||||
| Liquidated damages | 1,487,577 | 728,516 | ||||||
| Stock-based compensation | 14,641,181 | 10,364,787 | ||||||
| Deferred income taxes | 210,832 | (19,541,127 | ) | |||||
| Other | (245,285 | ) | (363,147 | ) | ||||
| Change in operating assets and liabilities net of effect of business combinations: | ||||||||
| Accounts receivable | 362,460 | (1,685,948 | ) | |||||
| Factor receivables | - | (6,130,674 | ) | |||||
| Subscription acquisition costs | (34,945,422 | ) | (5,008,080 | ) | ||||
| Royalty fees | 15,000,000 | (41,250,000 | ) | |||||
| Prepayments and other current assets | (356,528 | ) | (1,702,064 | ) | ||||
| Other long-term assets | (245,525 | ) | (276,145 | ) | ||||
| Accounts payable | (1,404,703 | ) | 3,323,196 | |||||
| Accrued expenses | (3,392,507 | ) | 11,986,442 | |||||
| Unearned revenue | 21,695,088 | 9,201,586 | ||||||
| Subscription refund liability | 891,359 | (2,283,351 | ) | |||||
| Other long-term liabilities | 511,055 | - | ||||||
| Operating lease liabilities | 1,814,601 | (226,724 | ) | |||||
| Net cash used in operating activities | (32,294,587 | ) | (56,954,306 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (1,212,003 | ) | (150,763 | ) | ||||
| Capitalized platform development | (3,750,541 | ) | (2,537,402 | ) | ||||
| Proceeds from sale of intangible asset | 350,000 | - | ||||||
| Payments for acquisition of businesses, net of cash | (315,289 | ) | (16,331,026 | ) | ||||
| Net cash used in investing activities | (4,927,833 | ) | (19,019,191 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from long-term debt | 11,702,725 | 71,000,000 | ||||||
| Repayments of long-term debt | - | (17,307,364 | ) | |||||
| Payment of debt issuance costs on long-term debt | (560,500 | ) | (7,162,382 | ) | ||||
| Proceeds from issuance of Series H convertible preferred stock | 113,000 | - | ||||||
| Proceeds from (repayments of) convertible debt | (1,130,903 | ) | 2,000,000 | |||||
| Proceeds from exercise of common stock options | 3,767 | - | ||||||
| Proceeds from issuance of Series I convertible preferred stock | - | 23,100,000 | ||||||
| Proceeds from issuance of Series J convertible preferred stock | 6,000,000 | 15,000,000 | ||||||
| Proceeds from issuance of Series K convertible preferred stock | 14,675,000 | - | ||||||
| Payment of issuance costs of Series I convertible preferred stock | - | (1,459,858 | ) | |||||
| Payment of issuance costs of Series J convertible preferred stock | - | (580,004 | ) | |||||
| Proceeds (repayments), net of borrowings, under line of credit | 7,178,791 | (1,048,194 | ) | |||||
| Payment for taxes related to repurchase of restricted common stock | (520,444 | ) | (256,058 | ) | ||||
| Payment of restricted stock liabilities | (177,425 | ) | - | |||||
| Repayment of promissory notes | - | (366,842 | ) | |||||
| Net cash provided by financing activities | 37,284,011 | 82,919,298 | ||||||
| Net increase in cash, cash equivalents, and restricted cash | 61,591 | 6,945,801 | ||||||
| Cash, cash equivalents, and restricted cash – beginning of year | 9,473,090 | 2,527,289 | ||||||
| Cash, cash equivalents, and restricted cash – end of year | $ | 9,534,681 | $ | 9,473,090 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 645,681 | $ | 2,852,262 | ||||
| Cash paid for income taxes | - | - | ||||||
| Noncash investing and financing activities | ||||||||
| Reclassification of stock-based compensation to platform development | $ | 1,608,995 | $ | 1,307,390 | ||||
| Debt discount on long-term debt | 913,865 | - | ||||||
| Discount on convertible debt allocated to embedded derivative liabilities | - | 1,074,000 | ||||||
| Exercise of warrants for issuance common stock | - | 735,186 | ||||||
| Payment of long-term debt for issuance of Series J convertible preferred stock | - | 4,853,933 | ||||||
| Liquidated damages recognized upon issuance of convertible debt | - | 84,000 | ||||||
| Liquidated damages liability recorded against cash proceeds for Series I convertible preferred stock | - | 1,940,400 | ||||||
| Restricted common stock units issued in connection with acquisition of LiftIgniter | 500,000 | - | ||||||
| Assumption of liabilities in connection with acquisition of LiftIgniter | 140,381 | - | ||||||
| Liquidated damages liability recorded against cash proceeds for Series J convertible preferred stock | - | 1,680,000 | ||||||
| Conversion of convertible debt into common stock | 21,402,488 | - | ||||||
| Conversion of embedded derivative liabilities into common stock | 10,929,996 | - | ||||||
| Conversion of Series I convertible preferred stock into common stock | 19,699,742 | - | ||||||
| Conversion of Series J convertible preferred stock into common stock | 23,739,996 | - | ||||||
| Conversion of Series K convertible preferred stock into common stock | 17,481,500 | - | ||||||
| Deemed dividend on Series H convertible preferred stock | 502,000 | - | ||||||
| Deemed dividend on Series I convertible preferred stock | 5,082,000 | - | ||||||
| Deemed dividend on Series J convertible preferred stock | 586,545 | - | ||||||
| Deemed dividend on Series K convertible preferred stock | 9,472,050 | - | ||||||
| Payment of long-term debt for issuance of Series K convertible preferred stock | 3,367,000 | - | ||||||
| Payment of promissory note for issuance for Series H convertible preferred stock | 389,000 | |||||||
See accompanying notes to consolidated financial statements.
| F-6 |
THEMAVEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020 and 2019
| 1. | Organization and Basis of Presentation |
Organization
TheMaven, Inc. (the “Maven” or “Company”), was incorporated in Delaware on October 1, 1990. On October 11, 2016, the predecessor entity now known as Maven exchanged its shares with another entity that was incorporated in Delaware on July 22, 2016. On November 4, 2016, these entities consummated a recapitalization. This resulted in Maven becoming the parent entity, and the other Delaware entity becoming the wholly owned subsidiary. On December 19, 2019, the Company’s wholly owned subsidiaries Maven Coalition, Inc., and HubPages, Inc., a Delaware corporation that was acquired by the Company in a merger during 2018 (“HubPages”), were merged into another of the Company’s wholly owned subsidiaries, Say Media, Inc., a Delaware corporation that was acquired by the Company in a merger during 2018 (“Say Media”), with Say Media as the surviving corporation. On January 6, 2020, Say Media changed its name to Maven Coalition, Inc. (“Coalition”). As of December 31, 2020, the Company’s wholly owned subsidiaries consist of Coalition, Maven Media Brands, LLC (“Maven Media” formed during 2019 as a wholly owned subsidiary of Maven) and TheStreet, Inc. (“TheStreet” acquired by the Company in a merger during 2019 as further described in Note 3).
Unless the context indicates otherwise, Maven, Coalition, and TheStreet, are together hereinafter referred to as the “Company.”
Business Operations
The Company operates a best-in-class technology platform empowering premium publishers who impact, inform, educate and entertain. The Company operates a significant portion of the media businesses for Sports Illustrated (as defined below), own and operate TheStreet, Inc. (the “TheStreet”), and power more than 250 independent brands. The Maven technology platform (the “Maven Platform”) provides digital publishing, distribution, and monetization capabilities for the Sports Illustrated and TheStreet businesses as well as a coalition of independent, professionally managed, online media publishers (each a “Publisher Partner”). Each Publisher Partner joins the media-coalition by invitation-only and is drawn from premium media brands and independent publishing businesses. Publisher Partners publish content and oversee an online community for their respective sites, leveraging our proprietary technology platform to engage the collective audiences within a single network. Generally, Publisher Partners are independently owned, strategic partners who receive a share of revenue from the interaction with their content. When they join, the Company believes Publisher Partners will benefit from the proprietary technology of the Maven Platform, techniques and relationships. Advertising revenue may improve due to the scale we have achieved by combining all Publisher Partners onto a single platform and a large and experienced sales organization. They may also benefit from our membership marketing and management systems, which we believe will enhance their revenue. Additionally, the Company believes the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management.
| F-7 |
The Company’s growth strategy is to continue to expand the coalition by adding new Publisher Partners in key verticals that management believes will expand the scale of unique users interacting on the Company’s technology platform. In each vertical, the Company seeks to build around a leading brand, such as Sports Illustrated (for sports) and TheStreet (for finance), surround it with subcategory publisher specialists, and further enhance coverage with individual expert contributors. The primary means of expansion is adding independent Publisher Partners and/or acquiring publishers that have premium branded content and can broaden the reach and impact of the Company’s technology platform.
In June 2019, the Company entered into a licensing agreement (the “Initial Licensing Agreement”) with ABG-SI LLC (“ABG”), as amended by Amendment No. 1 to Licensing Agreement, dated September 1, 2019 (the “First Amendment”), Amendment No. 2 to Licensing Agreement, dated April 1, 2020 (the “Second Amendment”), and Amendment No. 3 to Licensing Agreement, dated July 28, 2020 (the “Third Agreement” and, together with the Initial Licensing Agreement, First Amendment, and Second Amendment, the “Sports Illustrated Licensing Agreement”) to license certain Sports Illustrated (“Sports Illustrated”) brands as part of its growth strategy. In August 2019, the Company acquired TheStreet. For addition information, see Note 3.
The Company’s common stock is quoted on the OTC Markets Group Inc.’s Pink Open Market under the symbol “MVEN”.
Seasonality
The Company experiences typical media company advertising and membership sales seasonality, which is strong in the fiscal fourth quarter and slower in the fiscal first quarter.
Going Concern
The Company performed an annual reporting period going concern assessment. Management is required to assess its ability to continue as a going concern. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments that might be necessary if it is unable to continue as a going concern.
The Company has a history of recurring losses. The Company’s recurring losses from operations and net capital deficiency have been evaluated by management to determine if the significance of those conditions or events would limit its ability to meet its obligations when due. The operating loss realized in fiscal 2020 was primarily a result of the impact on our business from the COVID-19 pandemic and the related shut down of most professional and collegiate sports, which reduced user traffic and advertising revenue. The operating loss realized in fiscal 2019 was primarily a result of a marketing investment in customer growth, together with investment in people and technology as we continued to expand our operations, and operations rapidly expanding during fiscal 2019 with the TheStreet Merger and the Sports Illustrated Licensing Agreement.
As reflected in these consolidated financial statements, the Company had revenues of $128,032,397 for the year ended December 31, 2020, and experienced recurring net losses from operations, negative working capital, and negative operating cash flows. During the year ended December 31, 2020, the Company incurred a net loss attributable to common stockholders of $104,874,558, utilized cash in operating activities of $32,294,587, and as of December 31, 2020, had an accumulated deficit of $162,273,286. The Company has financed its working capital requirements since inception through the issuance of debt and equity securities.
| F-8 |
The negative impact from the COVID-19 pandemic during 2021 has been to a lesser extent than in 2020. Beginning in 2021, restrictions on non-essential work activity have begun to lift and sporting and other events have begun to be held, with attendance closer to pre-pandemic levels, which has resulted in an increase in traffic to the Maven Platform and, thereby an increase in advertising revenue. The ultimate extent of the impact on our operational and financial performance will depend on future developments, including the duration and spread of the COVID-19 pandemic, whether related group gathering and sports event advisories and restrictions will be put in place again, and the extent and effectiveness of containment and other actions taken, including the percentage of the population that receives COVID-19 vaccinations, all of which remain uncertain at the time of issuance of our accompanying consolidated financial statements.
Management has evaluated whether relevant conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern. Substantial doubt exists when conditions and events, considered in the aggregate, indicate it is probable that a company will not be able to meet its obligations as they become due within one year after the issuance date of its financial statements. Management’s assessment is based on the relevant conditions that are known or reasonably knowable as of the date these consolidated financial statements were issued or were available to be issued.
Management’s assessment of the Company’s ability to meet its future obligations is inherently judgmental, subjective and susceptible to change. The factors that the Company considered important in its going concern analysis, include, but are not limited to, the Company’s fiscal 2021 cash flow forecast and its fiscal 2021 operating budget. Management also considered the Company’s implementation of additional measures, if required, related to potential revenue and earnings declines from COVID-19. These factors consider information including, but not limited to, the Company’s financial condition, liquidity sources, obligations due within one year after the issuance date of these consolidated financial statements, the funds necessary to maintain operations and financial conditions, including negative financial trends or other indicators of possible financial difficulty.
In particular, the Company’s plan for the: (1) 2021 cash flow forecast, considered the use of its working capital line with FastPay (as described in Note 14) to fund changes in working capital, under which the Company has available credit of approximately $8.5 million as of the issuance date of these consolidated financial statements for the year ended December 31, 2020, and that the Company does not anticipate the need for any further borrowings that are subject to the approval of the holders of the Term Note (as described in Note 19) under which the Company may be permitted to borrow up to an additional $5.0 million; and (2) 2021 operating budget, considered that approximately fifty-eight percent of the Company’s revenue is from recurring subscriptions, generally paid in advance, and that digital subscription revenue, that accounts for approximately thirty percent of subscription revenue, grew approximately thirty percent in 2020 demonstrating the strength of its premium brand, and the plan to continue to grow its subscription revenue from its acquisition of TheStreet in 2019 (as described in Note 3) and to grow premium digital subscriptions from its Sports Illustrated Licensed Brands (as described in Note 3), in which were launched in February 2021.
The Company has considered both quantitative and qualitative factors as part of the assessment that are known or reasonably knowable as of the date these consolidated financial statements were issued or were available to be issued and concluded that conditions and events considered in the aggregate, do not raise substantial doubt about the Company’s ability to continue as a going concern for a one-year period following the financial statement issuance date.
Reclassifications
Certain comparative amounts as of and for the year ended December 31, 2019 have been reclassified to conform to the current period’s presentation. These reclassifications were immaterial, both individually and in the aggregate. These changes did not impact previously reported loss from operations or net loss.
| F-9 |
| 2. | Summary of Significant Accounting Policies |
Principles of Consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the financial statements of Maven and its wholly owned subsidiaries, Coalition, and TheStreet. Intercompany balances and transactions have been eliminated in consolidation.
Foreign Currency
The functional currency of the Company’s foreign subsidiaries is the local currencies (U.K. pounds sterling and Canadian dollar), as it is the monetary unit of account of the principal economic environment in which the Company’s foreign subsidiaries operate. All assets and liabilities of the foreign subsidiaries are translated at the current exchange rate as of the end of the period, and revenue and expenses are translated at average exchange rates in effect during the period. The gain or loss resulting from the process of translating foreign currencies financial statements into U.S. dollars was immaterial for the years ended December 31, 2020 and 2019, therefore, a foreign currency cumulative translation adjustment was not reported as a component of accumulated other comprehensive income (loss) and the unrealized foreign exchange gain or loss was omitted from the consolidated statements of cash flows. Foreign currency transaction gains and losses, if any, resulting from or expected to result from transactions denominated in a currency other than the functional currency are recognized in other income, net on the consolidated statements of operations.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to the selection of useful lives of property and equipment, intangible assets, capitalization of platform development and associated useful lives; assumptions used in accruals for potential liabilities; fair value of assets acquired and liabilities assumed in the business acquisitions, the fair value of the Company’s goodwill and the assessment of acquired goodwill, other intangible assets and long-lived assets for impairment; determination of the fair value of stock-based compensation and valuation of derivatives liabilities; and the assumptions used to calculate contingent liabilities, and realization of deferred tax assets. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. Actual results could differ from these estimates.
Risks and Uncertainties
The Company has a limited operating history and has not generated significant revenues to date to cover its operating expenses. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effect on the Company’s financial condition and the results of its operations.
In addition, the Company will compete with many companies that currently have extensive and well-funded projects, marketing and sales operations as well as extensive human capital. The Company may be unable to compete successfully against these companies. The Company’s industry is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, and/or expertise may become obsolete and/or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer and market demands, and enhance its current technology under development.
| F-10 |
With the initial onset of COVID-19, the Company faced significant change in its advertisers’ buying behavior. The Company’s advertising revenue from Sports Illustrated was impacted as a result of sports authorities around the world making the decision to postpone/cancel high attendance sports events in an effort to reduce the spread of the COVID-19 virus. Since May 2020, there has been a steady recovery in the advertising market in both pricing and volume, which coupled with the return of professional and college sports yielded steady growth in revenues through the balance of 2020 and the first half of 2021. The Company expects a continued modest growth in advertising revenue back toward pre-pandemic levels. As a result of the Company’s advertising revenue declining in early 2020, the Company is vulnerable to a risk of loss in the near term and it is at least reasonably possible that events or circumstances may occur that could cause a significant impact in the near term, that depend on future developments, including the duration of COVID-19, future sport event advisories and restrictions, and the extent and effectiveness of containment actions taken.
Since August 2018, B. Riley FBR, Inc. (“B. Riley FBR”), a registered broker-dealer owned by B. Riley Financial, Inc., a diversified publicly-traded financial services company (“B. Riley”), has been instrumental in providing investment banking services to the Company and in raising debt and equity capital for the Company. These services have included raising debt and equity capital to support various acquisitions, including TheStreet, the Sports Illustrated Licensing Agreement with ABG (as described in Note 3) and the acquisition of the College Spun Media Incorporated (as described in Note 27). The raising debt and equity capital for the acquisitions, refinancing and working capital purposes included the sale of the 12% Convertible Debentures (as described in Note 18), 12% Second Amended Senior Secured Notes (as described in Note 19), Preferred Stock (as described in Note 20), and subsequent equity offerings of common stock (as described in Note 27).
Revenue Recognition
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company generates all of its revenue from contracts with customers. The Company accounts for revenue on a gross basis, as compared to a net basis, in its statement of operations. Cost of revenues is presented as a separate line item in the statement of operations. The Company has made this determination based on it taking the credit risk in its revenue-generating transactions and it also being the primary obligor responsible for providing the services to the customer.
The following is a description of the principal activities from which the Company generates revenue:
Advertising Revenue
Digital Advertising – The Company recognizes revenue from digital advertisements at the point when each ad is viewed. The quantity of advertisements, the impression bid prices and revenue are reported on a real-time basis. The Company enters into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with its various channels. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. The Company owes its independent Publisher Partners a revenue share of the advertising revenue earned, which is recorded as service costs in the same period in which the associated advertising revenue is recognized.
Advertising revenue that is comprised of fees charged for the placement of advertising, on the Company’s flagship website, TheStreet.com, is recognized as the advertising or sponsorship is displayed, provided that collection of the resulting receivable is reasonably assured.
Print Advertising – Advertising related revenues for print advertisements are recognized when advertisements are published (defined as an issue’s on-sale date), net of provisions for estimated rebates, rate adjustments, and discounts.
| F-11 |
Subscription Revenue
Digital Subscriptions – The Company enters into contracts with internet users that subscribe to premium content on the owned and operated media channels and facilitate such contracts between internet users and our Publisher Partners. These contracts provide internet users with a membership subscription to access the premium content. The Company owes its independent Publisher Partners a revenue share of the membership subscription revenue earned, which is initially deferred and recorded as deferred contract costs. The Company recognizes deferred contract costs over the membership subscription term in the same pattern that the associated membership subscription revenue is recognized.
Subscription revenue generated from the Company’s flagship website TheStreet.com from institutional and retail customers is comprised of subscriptions and license fees for access to securities investment information, stock market commentary, director and officer profiles, relationship capital management services, and transactional information pertaining to mergers and acquisitions and other changes in the corporate control environment. Subscriptions are charged to customers’ credit cards or are directly billed to corporate subscribers, and are generally billed in advance on a monthly, quarterly or annual basis. The Company calculates net subscription revenue by deducting from gross revenue an estimate of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue is recognized ratably over the subscription periods. Unearned revenue relates to payments for subscription fees for which revenue has not been recognized because services have not yet been provided.
Circulation Revenue
Circulation revenues include magazine subscriptions and single copy sales at newsstands.
Print Subscriptions – Revenues from magazine subscriptions are deferred and recognized proportionately as products are distributed to subscribers.
Newsstand – Single copy revenue is recognized on the publication’s on-sale date, net of provisions for estimated returns. The Company bases its estimates for returns on historical experience and current marketplace conditions.
Licensing Revenue
Content licensing-based revenues are accrued generally monthly or quarterly based on the specific mechanisms of each contract. Generally, revenues are accrued based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically recorded within three months of the initial estimates and have not been material. Any minimum guarantees are typically earned evenly over the fiscal year.
Nature of Performance Obligations
At contract inception, the Company assesses the obligations promised in its contracts with customers and identifies a performance obligation for each promise to transfer a good or service or bundle that is distinct. To identify the performance obligations, the Company considers all the promises in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, the Company allocates the total contract consideration to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when, or as, the performance obligations are satisfied and control is transferred to the customer.
| F-12 |
Digital Advertising – The Company sells digital advertising inventory on its websites directly to advertisers or through advertising agencies. The Company’s performance obligations related to digital advertising are generally satisfied when the advertisement is run on the Company’s platform. The price for direct digital advertising is determined in contracts with the advertisers. Revenue from the sale of direct digital advertising is recognized when the advertisements are delivered based on the contract. The customer is invoiced the agreed-upon price in the month following the month that the advertisements are delivered with normal trade terms. The agreed upon price is adjusted for estimated provisions for rebates, rate adjustments, and discounts. As part of the Company’s customary business practices, digital advertising contracts may include a guaranteed number of impressions and sales incentives to its customers including volume discounts, rebates, value added impressions, etc. For all such contracts that include these types of variable consideration, the Company estimates the variable consideration and factors in such an estimate when determining the transaction price.
Print Advertising – The Company provides advertisement placements in print media directly to advertisers or through advertising agencies. The Company’s performance obligations related to print advertising are satisfied when the magazine in which an advertisement appears is published, which is defined as an issue’s on-sale date. The customer is invoiced the agreed-upon price when the advertisements are published under normal industry trade terms. The agreed upon price is adjusted for estimated provisions for rebates, rate adjustments, and discounts. As part of the Company’s customary business practices, print advertising contracts include guaranteed circulation levels of magazines, referred to as rate base, and a number of sales incentives to its customers including volume discounts, rebates, bonus pages, etc. For all such contracts that include these types of variable consideration, the Company estimates such when determining the transaction price.
Digital Subscriptions – The Company recognizes revenue from each membership subscription to access the premium content over time based on a daily calculation of revenue during the reporting period, which is generally one year. Subscriber payments are initially recorded as unearned revenue on the balance sheets. As the Company provides access to the premium content over the membership subscription term, the Company recognizes revenue and proportionately reduces the unearned revenue balance.
Print Subscriptions – The Company sells magazines to consumers through subscriptions. Each copy of a magazine is determined to be a distinct performance obligation that is satisfied when the publication is sent to the customer. The majority of the Company’s subscription sales are prepaid at the time of order. Subscriptions may be canceled at any time for a refund of the price paid for remaining issues. As the contract may be canceled at any time for a full refund of the unserved copies, the contract term is determined to be on an issue-to-issue basis as these contracts do not have substantive termination penalties. Revenues from subscriptions are deferred and recognized proportionately as subscribers are served. Some magazine subscription offers contain more than one magazine title in a bundle. The Company allocates the total contract consideration to each distinct performance obligation, or magazine title, based on a standalone-selling price basis.
Newsstand – The Company sells single copy magazines, or bundles of single copy magazines, to wholesalers for ultimate resale on newsstands primarily at major retailers and grocery/drug stores, and in digital form on tablets and other electronic devices. Publications sold to magazine wholesalers are sold with the right to receive credit from the Company for magazines returned to the wholesaler by retailers. Revenue is recognized on the issue’s on-sale date as the date aligns most closely with the date that control is transferred to the customer. The Company bases its estimates for returns on historical experience and current marketplace conditions.
Licensing – The Company has entered into various licensing agreements that provide third-party partners the right to utilize the Company’s content. Functional licenses in national media consist of content licensing.
| F-13 |
Timing of Satisfaction of Performance Obligations
Point-in-Time Performance Obligations – For performance obligations related to certain digital advertising space and sales of print advertisements, the Company determines that the customer can direct the use of and obtain substantially all the benefits from the advertising products as the digital impressions are served or on the issue’s on-sale date. For performance obligations related to sales of magazines through subscriptions, the customer obtains control when each magazine issue is mailed to the customer on or before the issue’s on-sale date. For sales of single copy magazines on newsstands, revenue is recognized on the issue’s on-sale date as the date aligns most closely with the date that control is transferred to the customer. Revenues from functional licenses are recognized at a point-in-time when access to the completed content is granted to the partner.
Over-Time Performance Obligations – For performance obligations related to sales of certain digital advertising space, the Company transfers control and recognizes revenue over time by measuring progress towards complete satisfaction using the most appropriate method.
For performance obligations related to digital advertising, the Company satisfies its performance obligations on some flat-fee digital advertising placements over time using a time-elapsed output method.
Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized. The Company has determined that the above method provides a faithful depiction of the transfer of goods or services to the customer. For performance obligations recognized using a time-elapsed output method, the Company’s efforts are expended evenly throughout the period.
Performance obligations related to subscriptions to premium content on the digital media channels provides access for a given period of time, which is generally one year. The Company recognizes revenue from each membership subscription over time based on a daily calculation of revenue during the reporting period.
Transaction Price and Amounts Allocated to Performance Obligations
Determining the Transaction Price – Certain advertising contracts contain variable components of the transaction price, such as volume discounts and rebates. The Company has sufficient historical data and has established processes to reliably estimate these variable components of the transaction price.
Subscription revenue generated from the flagship website TheStreet.com is subject to estimation and variability due to the fact that, in the normal course of business, subscribers may for various reasons contact the Company or their credit card companies to request a refund or other adjustment for a previously purchased subscription. With respect to many of the Company’s annual newsletter subscription products, the Company offers the ability to receive a refund during the first 30 days but none thereafter. Accordingly, the Company maintains a provision for estimated future revenue reductions resulting from expected refunds and chargebacks related to subscriptions for which revenue was recognized in a prior period. The calculation of this provision is based upon historical trends and is reevaluated each quarter.
The Company typically does not offer any type of variable consideration in standard magazine subscription contracts. For these contracts, the transaction price is fixed upon establishment of the contract that contains the final terms of the sale including description, quantity and price of each subscription purchased. Therefore, the Company does not estimate variable consideration or perform a constraint analysis for these contracts.
A right of return exists for newsstand contracts. The Company has sufficient historical data to estimate the final amount of returns and reduces the transaction price at contract inception for the expected return reserve.
There is no variable consideration related to functional licenses.
| F-14 |
Estimating Standalone-Selling Prices – For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone-selling price basis. The standalone-selling price is the price at which the Company would sell a promised good or service separately to the customer. In situations in which an obligation is bundled with other obligations and the total amount of consideration does not reflect the sum of individual observable prices, the Company allocates the discount to (1) a single obligation if the discount is attributable to that obligation or (2) prorates across all obligations if the discount relates to the bundle. When standalone-selling price is not directly observable, the Company estimates and considers all the information that is reasonably available to the Company, including market conditions, entity specific factors, customer information, etc. The Company maximizes the use of observable inputs and applies estimation methods consistently in similar circumstances.
Measuring Obligations for Returns and Refunds – The Company accepts product returns in some cases. The Company establishes provisions for estimated returns concurrently with the recognition of revenue. The provisions are established based upon consideration of a variety of factors, including, among other things, recent and historical return rates for both specific products and distributors and the impact of any new product releases and projected economic conditions.
As of December 31, 2020 and 2019, a subscription refund liability of $4,035,531 and $3,144,172, respectively, was recorded for the provision for the estimated returns and refunds on the consolidated balance sheets.
Contract Modifications
The Company occasionally enters into amendments to previously executed contracts that constitute contract modifications. The Company assesses each of these contract modifications to determine:
| ● | if the additional services and goods are distinct from the services and goods in the original arrangement; and | |
| ● | if the amount of consideration expected for the added services or goods reflects the stand-alone selling price of those services and goods. |
A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulative catch-up basis (further details are provided under the headings Contract Balances and Subscription Acquisition Costs).
| F-15 |
Disaggregation of Revenue
The following table provides information about disaggregated revenue by product line, geographical market and timing of revenue recognition:
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenue by product line: | ||||||||
| Advertising | $ | 44,359,822 | $ | 35,918,370 | ||||
| Digital subscriptions | 28,495,676 | 6,855,038 | ||||||
| Magazine circulation | 50,580,213 | 9,046,473 | ||||||
| Other | 4,596,686 | 1,523,429 | ||||||
| Total | $ | 128,032,397 | $ | 53,343,310 | ||||
| Revenue by geographical market: | ||||||||
| United States | $ | 122,570,712 | $ | 52,611,255 | ||||
| Other | 5,461,685 | 732,055 | ||||||
| Total | $ | 128,032,397 | $ | 53,343,310 | ||||
| Revenue by timing of recognition: | ||||||||
| At point in time | $ | 99,536,721 | $ | 47,557,652 | ||||
| Over time | 28,495,676 | 5,785,658 | ||||||
| Total | $ | 128,032,397 | $ | 53,343,310 | ||||
Cost of Revenue
Cost of revenue represents the cost of providing the Company’s digital media network channels and advertising and membership services. The cost of revenue that the Company has incurred in the periods presented primarily include: Publisher Partner guarantees and revenue share payments; amortization of developed technology and platform development; royalty fees; hosting and bandwidth and software license fees; printing and distribution costs; payroll and related expenses for customer support, technology maintenance, and occupancy costs of related personnel; fees paid for data analytics and to other outside service providers; and stock-based compensation of related personnel and stock-based compensation related to Publisher Partner Warrants (as described in Note 22).
Contract Balances
The timing of the Company’s performance under its various contracts often differs from the timing of the customer’s payment, which results in the recognition of a contract asset or a contract liability. A contract asset is recognized when a good or service is transferred to a customer and the Company does not have the contractual right to bill for the related performance obligations. An asset is recognized when certain costs incurred to obtain a contract meet the capitalization criteria. A contract liability is recognized when consideration is received from the customer prior to the transfer of goods or services.
| F-16 |
The following table provides information about contract balances:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Unearned revenue (short-term contract liabilities): | ||||||||
| Digital subscriptions | $ | 15,039,331 | $ | 8,634,939 | ||||
| Magazine circulation | 46,586,345 | 23,528,148 | ||||||
| $ | 61,625,676 | $ | 32,163,087 | |||||
| Unearned revenue (long-term contract liabilities): | ||||||||
| Digital subscriptions | $ | 593,136 | $ | 478,557 | ||||
| Magazine circulation | 22,712,961 | 30,478,154 | ||||||
| Other | 192,500 | 222,500 | ||||||
| $ | 23,498,597 | $ | 31,179,211 | |||||
Unearned Revenue – Unearned revenue, also referred to as contract liabilities, include payments received in advance of performance under the contracts and are recognized as revenue over time. The Company records contract liabilities as unearned revenue on the consolidated balance sheets. Digital subscription and magazine circulation revenue of $32,163,087 was recognized during the year ended December 31, 2020 from unearned revenue at the beginning of the year.
During January and February of 2020, the Company modified certain digital and magazine subscription contracts that prospectively changed the frequency of the related issues required to be delivered on a yearly basis (the “Contract Modifications”). The Company determined that the remaining digital content and magazines to be delivered are distinct from the digital content or magazines already provided under the original contract. As a result, the Company in effect established a new contract that included only the remaining digital content or magazines. Accordingly, the Company allocated the remaining performance obligations in the contracts as consideration from the original contract that has not yet been recognized as revenue.
Cash, Cash Equivalents, and Restricted Cash
The Company maintains cash, cash equivalents, and restricted cash at banks where amounts on deposit may exceed the Federal Deposit Insurance Corporation limit during the year. Cash and cash equivalents represent cash and highly liquid investments with an original contractual maturity at the date of purchase of three months. As of December 31, 2020 and 2019, cash and cash equivalents consist primarily of checking, savings deposits and money market accounts. These deposits exceeded federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk regarding its cash and cash equivalents.
The following table reconciles total cash, cash equivalents, and restricted cash:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash and cash equivalents | $ | 9,033,872 | $ | 8,852,281 | ||||
| Restricted cash | 500,809 | 620,809 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 9,534,681 | $ | 9,473,090 | ||||
As of December 31, 2020, the Company had restricted cash of $500,809, which serves as collateral for certain credit card merchant accounts with a bank. As of December 31, 2019, the Company had restricted cash of $620,809 of which (1) $500,000 served as collateral for an outstanding letter of credit for a security deposit for office space leased at 14 Wall Street, 15th Floor, New York, New York (see Note 7), and (2) $120,809 served as collateral for certain credit card merchant accounts with a bank.
| F-17 |
Accounts Receivable
The Company receives payments from advertising customers based upon contractual payment terms; accounts receivable is recorded when the right to consideration becomes unconditional and are generally collected within 90 days. The Company generally receives payments from digital and print subscription customers at the time of sign up for each subscription; accounts receivable from merchant credit card processors are recorded when the right to consideration becomes unconditional and are generally collected weekly. Accounts receivable as of December 31, 2020 and 2019 of $16,497,626 and $16,233,955, respectively, are presented net of allowance for doubtful accounts. The allowance for doubtful accounts as of December 31, 2020 and 2019 was $892,352 and $287,902, respectively
Subscription Acquisition Costs
Subscription acquisition costs include the incremental costs of obtaining a contract with a customer, paid to external parties, if it expects to recover those costs. The Company has determined that sales commissions paid on all third-party agent sales of subscriptions are direct and incremental and, therefore, meet the capitalization criteria. Direct mail costs also meet the requirements to be capitalized as assets if they are proven to be recoverable. The incremental costs of obtaining a contract are amortized as revenue is recognized or over the term of the agreement.
Incremental costs of obtaining a contract also included contract fulfillment costs related to the revenue share to the Publisher Partners. The contract fulfillment costs were amortized over the same period as the associated revenue. The Company records incremental costs of obtaining a contract as subscription acquisition costs on the consolidated balance sheets. The Company had no asset impairment charges related to the subscription acquisition costs during the years ended December 31, 2020 and 2019.
The Contract Modifications resulted in subscription acquisition costs to be recognized on a prospective basis in the same proportion as the revenue that has not yet been recognized.
As of December 31, 2020 and 2019, subscription acquisition costs were $41,505,480 (short-term of $28,146,895 and long-term of $13,358,585) and $6,560,058 (short-term of $3,142,580 and long-term of $3,417,478), respectively. Subscription acquisition cost as of December 31, 2020 presented as current assets of $28,146,895 are expected to be amortized during the year ending December 31, 2021 and $13,358,585 presented as long-term assets are expected to be amortized after the year ending December 31, 2021.
Concentrations
Significant Customers – Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. While a reserve for the potential write-off of accounts receivable is maintained, the Company has not written off any significant accounts to date. To control credit risk, the Company performs regular credit evaluations of its customers’ financial condition.
Revenue from significant customers as a percentage of the Company’s total revenue are as follows:
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Customer 1 | - | 22.4 | % | |||||
There were no significant accounts receivable balances as a percentage of the Company’s total accounts receivable as of December 31, 2020 and 2019.
Significant Vendors – Concentrations of risk with respect to third party vendors who provide products and services to the Company are limited. If not limited, such concentrations could impact profitability if a vendor failed to fulfill their obligations or if a significant vendor was unable to renew an existing contract and the Company was not able to replace the related product or service at the same cost.
| F-18 |
Significant accounts payable balances as a percentage of the Company’s total accounts payable are as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Vendor 1 * | - | 61.7 | % | |||||
* The significant accounts payable balance as of December 31, 2019 related to the service agreements with Meredith Corporation (“Meredith”) (as described in Note 3).
Leases
The Company has various lease arrangements for certain equipment and its offices. Leases are recorded as an operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. At inception, the Company determines whether an arrangement that provides control over the use of an asset is a lease. When it is reasonably certain that the Company will exercise the renewal period, the Company includes the impact of the renewal in the lease term for purposes of determining total future lease payments. Rent expense is recognized on a straight-line basis over the lease term.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. The Company adopted ASU 2016-02 as of January 1, 2019 utilizing the modified retrospective transition method through a cumulative-effect adjustment. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of right-of-use assets. The adoption of ASU 2016-02 on January 1, 2019 resulted in the recognition of right-of-use assets of $1,003,221, lease liabilities for operating leases of $1,069,745, with no cumulative effect adjustment on retained earnings on its consolidated balance sheets, and with no material impact to its consolidated statements of operations (as further described in Note 7).
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statement of operations when realized. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives:
| Office equipment and computers | 1 – 3 years |
| Furniture and fixtures | 1 – 5 years |
| Leasehold improvements | Shorter of remaining lease term or estimated useful life |
Platform Development
In accordance with authoritative guidance, the Company capitalizes platform development costs for internal use when planning and design efforts are successfully completed, and development is ready to commence. The Company places capitalized platform development assets into service and commences amortization when the applicable project or asset is substantially complete and ready for its intended use. Once placed into service, the Company capitalizes qualifying costs of specified upgrades or enhancements to capitalized platform development assets when the upgrade or enhancement will result in new or additional functionality.
| F-19 |
The Company capitalizes internal labor costs, including payroll-based and stock-based compensation, benefits and payroll taxes, that are incurred for certain capitalized platform development projects related to the Company’s technology platform. The Company’s policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material.
Platform development costs are amortized on a straight-line basis over three years, which is the estimated useful life of the related asset and is recorded in cost of revenues on the consolidated statements of operations.
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that the purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the estimated fair values determined by management as of the acquisition date. Goodwill is measured as the excess of consideration transferred and the net fair values of the assets acquired and the liabilities assumed at the date of acquisition. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent the Company identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period, which may be up to one year from the acquisition date, or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Additionally, the Company identifies acquisition-related contingent payments and determines their respective fair values as of the acquisition date, which are recorded as accrued liabilities on the consolidated balance sheets. Subsequent changes in fair value of contingent payments are recorded on the consolidated statements of operations. The Company expenses transaction costs related to the acquisition as incurred.
Intangible Assets
Intangibles with finite lives, consisting of developed technology and trade names, are amortized using the straight-line method over the estimated economic lives of the assets. A finite lived intangible asset is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Intangibles with an indefinite useful life are not being amortized.
Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily by reference to the anticipated cash flows discounted at a rate commensurate with the risk involved.
| F-20 |
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets of businesses acquired in a business combination. Goodwill is not amortized but rather is tested for impairment at least annually on December 31, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company adopted ASU 2017-04 (as further described below under the heading Recent Accounting Pronouncements) during the first quarter of 2020 which eliminated Step 2 from the goodwill impairment test. The Company operates as one reporting unit, therefore, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the Company to its carrying value. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of its single reporting unit is less than its carrying amount as a basis of determining whether it is necessary to perform the quantitative goodwill impairment test. If the Company determines that it is more likely than not that its fair value is less than its carrying amount, then the quantitative goodwill impairment test will be performed. The quantitative goodwill impairment test identifies goodwill impairment and measures the amount of goodwill impairment loss to be recognized by comparing the fair value of the Company’s single reporting unit with its carrying amount. If the fair value exceeds the carrying amount, no further analysis is required; otherwise, any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value.
Deferred Financing Costs and Discounts on Debt Obligations
Deferred financing costs consist of cash and noncash consideration paid to lenders and third parties with respect to convertible debt and other financing transactions, including legal fees and placement agent fees. Such costs are deferred and amortized over the term of the related debt. Upon the settlement of debt or conversion of convertible debt into common stock, under certain circumstances, the pro rata portion of any related unamortized deferred financing costs are charged to operations.
Additional consideration in the form of warrants and other derivative financial instruments issued to lenders is accounted for at fair value utilizing information determined by consultants with the Company’s independent valuation firm. The fair value of warrants and derivatives are recorded as a reduction to the carrying amount of the related debt and are being amortized to interest expense over the term of such debt, with the initial offsetting entries recorded as a liability on the balance sheet. Upon the settlement or conversion of convertible debt into common stock, under certain circumstances, the pro rata portion of any related unamortized discount on debt is charged to operations.
Amortization of debt discount during the years ended December 31, 2020 and 2019, was $6,607,212 and $4,545,675, respectively.
Liquidated Damages
Liquidated damages are provided as a result of the following: (i) certain registration rights agreements provide for damages if the Company does not register certain shares of the Company’s common stock within the requisite time frame (the “Registration Rights Damages”); and (ii) certain securities purchase agreements provide for damages if the Company does not maintain its periodic filings with the Securities and Exchange Commission (“SEC”) within the requisite time frame (the “Public Information Failure Damages”). Obligations with respect to the Registration Rights Damages and the Public Information Failure Damages (collectively, the “Liquidated Damages”) are accounted for as contingent obligations when it is deemed probable the obligations would not be satisfied at the time a financing is completed and are subsequently reviewed at each quarter-end reporting date thereafter. When such quarterly review indicates that it is probable that the Liquidated Damages will be incurred, the Company records an estimate of each such obligation at the balance sheet date based on the amount due of such obligation. The Company reviews and revises such estimates at each quarter-end date based on updated information.
| F-21 |
Selling and Marketing
Selling and marketing expenses consist of compensation, employee benefits and stock-based compensation of selling and marketing, account management support teams, as well as commissions, travel, trade show sponsorships and events, conferences and advertising costs. The Company’s advertising expenses relate to direct-mail costs for magazine subscription acquisition efforts, print, and digital advertising. Advertising costs that are not capitalized are expensed the first time the advertising takes place. During the years ended December 31, 2020 and 2019, the Company incurred advertising expenses of $3,583,116 and $859,802, respectively, which are included within selling and marketing on the consolidated statements of operations.
General and Administrative
General and administrative expenses consist primarily of payroll for executive personnel, technology personnel incurred in developing conceptual formulation and determination of existence of needed technology, and administrative personnel along with any related payroll costs; professional services, including accounting, legal and insurance; facilities costs; conferences; other general corporate expenses; and stock-based compensation of related personnel.
Derivative Financial Instruments
The Company accounts for freestanding contracts that are settled in the Company’s equity securities, including common stock warrants, to be designated as an equity instrument, and generally as a liability. A contract so designated is carried at fair value on a company’s balance sheet, with any changes in fair value recorded as a gain or loss in a company’s results of operations.
The Company records all derivatives on the balance sheet at fair value, adjusted at the end of each reporting period to reflect any material changes in fair value, with any such changes classified as changes in derivatives valuation in the statement of operations. The calculation of the fair value of derivatives utilizes highly subjective and theoretical assumptions that can materially affect fair values from period to period. The recognition of these derivative amounts does not have any impact on cash flows.
At the date of exercise of any of the warrants, or the conversion of any convertible debt or preferred stock into common stock, the pro rata fair value of the related warrant liability and any embedded derivative liability is transferred to additional paid-in capital.
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
| F-22 |
The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.
The carrying amount of the Company’s financial instruments comprising of cash, restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term maturity of these instruments.
Preferred Stock
Preferred stock (the “Preferred Stock”) (as described in Note 20) is reported as a mezzanine obligation between liabilities and stockholders’ equity. If it becomes probable that the Preferred Stock will become redeemable, the Company will re-measure the Preferred Stock by adjusting the carrying value to the redemption value of the Preferred Stock assuming each balance sheet date is a redemption date.
Stock-Based Compensation
The Company provides stock-based compensation in the form of (a) stock awards to employees and directors, comprised of restricted stock awards and restricted stock units, (b) stock option grants to employees, directors and consultants, (c) common stock warrants to Publisher Partners (further details are provided under the heading Publisher Partner Warrants in Note 22), and (d) common stock warrants to ABG (further details are provided under the heading ABG Warrants in Note 22).
The Company accounts for stock awards and stock option grants to employees, directors and consultants by measuring the cost of services received in exchange for the stock-based payments as compensation expense in the Company’s consolidated financial statements. Stock awards and stock option grants to employees which are time-vested, are measured at fair value on the grant date, and charged to operations ratably over the vesting period. Stock awards and stock option grants to employees which are performance-vested, are measured at fair value on the grant date and charged to operations when the performance condition is satisfied.
The Publisher Partner Warrants granted are subject to a performance condition, which is generally based on the average number of unique visitors on the channel operated by the Publisher Partner generated during the six-month period from the launch of the Publisher Partner’s operations on Maven’s platform or the revenue generated during the period from issuance date through a specified end date. The Company recognizes expense for these Publisher Partner Warrants as the services are received. The Company has specific objective criteria for determination of the period over which services are received and expense is recognized.
Prior to the adoption of ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the Company accounted for stock-based payments to certain directors and consultants, and Publisher Partners (collectively the “non-employee awards”) by determining the value of the stock compensation based upon the measurement date at either (a) the date at which a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete, resulting in financial reporting period adjustments to stock-based compensation during the vesting terms for changes in the fair value of the awards. After adoption of ASU 2018-07, the measurement date for non-employee awards is the later of the adoption date of ASU 2018-07, or the date of grant, without change in the fair value of the award. There was no cumulative effect of adoption of ASU 2018-07 on January 1, 2019. For stock-based awards granted to non-employees subject to graded vesting that only contain service conditions, the Company has elected to recognize stock-based compensation using the straight-line recognition method.
| F-23 |
The fair value measurement of equity awards and grants used for stock-based compensation is as follows: (1) restricted stock awards and restricted stock units which are time-vested, are determined using the quoted market price of the Company’s common stock at the grant date; (2) stock option grants which are time-vested and performance-vested, are determined utilizing the Black-Scholes option-pricing model at the grant date; (3) restricted stock awards which provide for performance-vesting and a true-up provision, are determined through consultants with the Company’s independent valuation firm using the binomial pricing model at the grant date; (4) stock option grants which provide for market-based vesting with a time-vesting overlay, are determined through consultants with the Company’s independent valuation firm using the Monte Carlo model at the grant date; (5) Publisher Partner Warrants are determined utilizing the Black-Scholes option-pricing model; and (6) ABG warrants are determined utilizing the Monte Carlo model (further details are provided in Note 22).
Fair value determined under the Black-Scholes option-pricing model and Monte Carlo model is affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option or warrants, as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the equity award. Estimated volatility is based on the historical volatility of the Company’s common stock and is evaluated based upon market comparisons. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of common stock is determined by reference to the quoted market price of the Company’s common stock.
The fair value of the stock options granted were probability weighted effective January 1, 2019 under the Black-Scholes option-pricing model or Monte Carlo model as determined through consultants with the Company’s independent valuation firm since the value of the stock options, among other things, depend on the volatility of the underlying shares of the Company’s common stock, under the following two scenarios: (1) scenario one assumes that the Company’s common stock will be up-listed on a national stock exchange (the “Exchange”) on a certain listing date (the “Up-list”); and (2) scenario two assumes that the Company’s common stock is not up-listed on the Exchange prior to the final vesting date of the grants (the “No Up-list”), collectively referred to as the “Probability Weighted Scenarios”.
The Company classifies stock-based compensation in its consolidated statements of operations in the same manner in which the award recipient’s cash compensation cost is classified.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss carryforwards and temporary differences between financial statement bases of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in the income tax rates on deferred tax asset and liability balances is recognized in income in the period that includes the enactment date of such rate change. A valuation allowance is recorded for loss carryforwards and other deferred tax assets when it is determined that it is more likely than not that such loss carryforwards and deferred tax assets will not be realized.
The Company follows accounting guidance that sets forth a threshold for financial statement recognition, measurement, and disclosure of a tax position taken or expected to be taken on a tax return. Such guidance requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on technical merits of the position.
| F-24 |
Loss per Common Share
Basic loss per share is computed using the weighted average number of common shares outstanding during the period and excludes any dilutive effects of common stock equivalent shares, such as stock options, restricted stock, and warrants. All restricted stock awards are considered outstanding but is included in the computation of basic loss per common share only when the underlying restrictions expire, the shares are no longer forfeitable and, thus, are vested. All restricted stock units are included in the computation of basic loss per common share only when the underlying restrictions expire, the shares are no longer forfeitable and, thus, are vested. Contingently issuable shares are included in basic loss per common share only when there is no circumstance under which those shares would not be issued. Diluted loss per common share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive.
The Company excluded the outstanding securities summarized below (capitalized terms are described herein), which entitle the holders thereof to acquire shares of the Company’s common stock, from its calculation of net income loss per common share, as their effect would have been anti-dilutive.
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Series G Preferred Stock | 188,791 | 188,791 | ||||||
| Series H Preferred Stock | 59,384,849 | 58,787,879 | ||||||
| Series I Preferred Stock | - | 46,200,000 | ||||||
| Series J Preferred Stock | - | 28,571,429 | ||||||
| Indemnity shares of common stock | - | 412,500 | ||||||
| Restricted Stock Awards | 316,667 | 2,391,665 | ||||||
| Financing Warrants | 2,882,055 | 2,882,055 | ||||||
| AllHipHop Warrants | 125,000 | - | ||||||
| Publisher Partner Warrants | 789,541 | 939,540 | ||||||
| ABG Warrants | 21,989,844 | 21,989,844 | ||||||
| Restricted Stock Units | - | 2,399,997 | ||||||
| Common Stock Awards | 6,902,337 | 8,064,561 | ||||||
| Common Equity Awards | 82,062,314 | 65,013,645 | ||||||
| Outside Options | 3,052,000 | 3,724,667 | ||||||
| Total | 177,693,398 | 241,566,573 | ||||||
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In June 2016, the FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces a new model for recognizing credit losses for certain financial instruments, including loans, accounts receivable and debt securities. The new model requires an estimate of expected credit losses over the life of exposure to be recorded through the establishment of an allowance account, which is presented as an offset to the related financial asset. The expected credit loss is recorded upon the initial recognition of the financial asset. The Company adopted ASU 2016-13 as of the reporting period beginning January 1, 2020. No impact on the consolidated financial statements was recorded as a result of the adoption of ASU 2016-13.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, that simplifies the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test. The Step 2 test requires an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value determined in Step 1. This update also eliminates the qualitative assessment requirements for a reporting unit with zero or negative carrying value. Prospective adoption is required and the Company adopted ASU 2017-04 as of the reporting period beginning January 1, 2020. No impact on the consolidated financial statements was recorded as a result of the adoption of ASU 2017-04.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements. The update removes, modifies, and adds certain additional disclosures. The Company adopted ASU 2018-13 as of the reporting period beginning January 1, 2020. The adoption of this update required a change in disclosures and had no impact on the Company’s consolidated financial statements.
| F-25 |
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. ASU 2019-12 will be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the impact this update will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which updates various codification topics to simplify the accounting guidance for certain financial instruments with characteristics of liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and amends the diluted EPS computation for these instruments. ASU 2020-06 is effective for annual and interim reporting periods beginning after December 15, 2021, with early adoption permitted for annual and interim reporting periods beginning after December 15, 2020. The Company will adopt ASU 2020-06 as of the reporting period beginning January 1, 2021. The Company is currently evaluating the impact this update will have on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20 – Receivables – Nonrefundable Fees and Other Costs, which clarifies that a reporting entity should assess whether a callable debt security purchased at a premium is within the scope of ASC 310-20-35-33 each reporting period, which impacts the amortization period for nonrefundable fees and other costs. The Company will adopt ASU 2020-08 as of the reporting period beginning January 1, 2021. The Company is currently evaluating the impact this update will have on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company will adopt ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF), to provide explicit guidance on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 31, 2021. The Company is currently evaluating the impact this update will have on its consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
| F-26 |
| 3. | Acquisitions |
2020 Acquisitions
The Company uses the acquisition method of accounting, which is based on ASC, Business Combinations (Topic 805), and uses the fair value concepts which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.
On March 9, 2020, the Company entered into an asset purchase agreement with Petametrics Inc., dba LiftIgniter, a Delaware corporation (“LiftIgniter”), where it purchased substantially all the assets, including the intellectual property and excluding certain accounts receivable, and assumed certain liabilities. The purchase price consisted of: (1) cash payment of $184,087 on February 19, 2020, in connection with the repayment of all outstanding indebtedness, (2) at closing, a cash payment of $131,202, (3) collections of certain accounts receivable, (4) on the first anniversary date of the closing issuance of restricted stock units for an aggregate of up to 312,500 shares of the Company’s common stock, and (5) on the second anniversary date of the closing, issuance of restricted stock units for an aggregate of up to 312,500 shares of the Company’s common stock.
The composition of the purchase price is as follows:
| Cash | $ | 315,289 | ||
| Indemnity restricted stock units for shares of common stock | 500,000 | |||
| Total purchase consideration | $ | 815,289 |
The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:
| Accounts receivable | $ | 37,908 | ||
| Developed technology | 917,762 | |||
| Accounts payable | (53,494 | ) | ||
| Unearned revenue | (86,887 | ) | ||
| Net assets acquired | $ | 815,289 |
The useful life for the developed technology is three years (3.0 years).
2019 Acquisitions
TheStreet, Inc. – On June 11, 2019, the Company, TST Acquisition Co., Inc., a Delaware corporation (“TSTAC”), a newly-formed indirect wholly owned subsidiary of the Company, and TheStreet, entered into an agreement and plan of merger, as amended (the “TheStreet Merger Agreement”), pursuant to which TSTAC merged with and into TheStreet, with TheStreet continuing as the surviving corporation in the merger and as a wholly owned subsidiary of the Company (“TheStreet Merger”). TheStreet Merger Agreement provided that all issued and outstanding shares of common stock of TheStreet would be exchanged for an aggregate of $16,500,000 in cash. Pursuant to the terms of TheStreet Merger Agreement, on June 10, 2019, the Company deposited $16,500,000 into an escrow account pursuant to an escrow agreement.
| F-27 |
On August 7, 2019, the Company acquired all of the outstanding shares of TheStreet for total cash consideration of $16,500,000, pursuant to TheStreet Merger Agreement. The results of operation of the acquired business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements as of the acquisition date. TheStreet’s addition to the Company’s premium media coalition highlights its strategic growth and adds a flagship to the portfolio of major media brands. The Company acquired TheStreet to enhance the user’s experience by increasing content through the Company’s industry-leading technology, distribution and monetization platform. TheStreet is a digital financial media company that provides reporting on investment trends and analysis and operates a network of 28 premium content channels that act as an open community for writers, explorers, knowledge seekers and conversation starters to connect in an interactive and informative online space. In connection with TheStreet Merger, the Company entered into an arrangement with a co-founder to continue certain services (further details are provided under the heading Cramer Digital, Inc. Agreement in Note 25). TheStreet operates primarily in the United States.
The Company funded the cash consideration pursuant to TheStreet Merger from the net proceeds from the 12% Senior Secured Note financing (as described in Note 19).
The Company incurred $199,630 in transaction costs related to the acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. The acquisition related expenses were recorded within general and administrative expense on the consolidated statements of operations.
The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:
| Accounts receivable | $ | 1,586,031 | ||
| Prepaid expenses | 1,697,347 | |||
| Restricted cash | 500,000 | |||
| Other current assets | 53,001 | |||
| Other long-term assets | 689,512 | |||
| Property and equipment | 718,475 | |||
| Operating right-of-use assets | 1,395,474 | |||
| Developed technology | 4,388,104 | |||
| Trade name | 2,580,000 | |||
| Subscriber relationships | 2,150,000 | |||
| Advertiser relationships | 2,240,000 | |||
| Database | 1,140,000 | |||
| Goodwill | 8,815,090 | |||
| Accounts payable | (1,313,223 | ) | ||
| Accrued expenses | (1,129,009 | ) | ||
| Other current liabilities | (373,836 | ) | ||
| Unearned revenues | (6,242,335 | ) | ||
| Operating lease liabilities | (2,394,631 | ) | ||
| Net assets acquired | $ | 16,500,000 |
The Company utilized an independent appraisal, as well as other available market data, to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair value of the intangible assets were determined as follows: developed technology was determined under the cost approach with a useful life of three years (3.0 years); trade name was determined using the relief from royalty method of the income approach with a useful life of twenty years (20.0 years); subscriber relationships and advertising relationships were determined using the multi-period excess earnings method of the income approach with a useful life of eight and four tenths years (8.4 years) and nine and four tenths years (9.4 years), respectively; and data base was determined using the replacement cost method of the cost approach with a useful life of fifteen years (15.0 years). The weighted-average useful life for the intangible assets is eight and six tenths years (8.6 years). The fair value of the unearned revenues was determined with the following inputs: (1) projection of when unearned revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate.
| F-28 |
The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. The Company believes the factors that contributed to goodwill include the acquisition of a talented workforce that expands the Company’s expertise and synergies that are specific to the Company’s consolidated business and not available to market participants.
Licensing Agreement with ABG-SI LLC – On June 14, 2019, the Company and ABG, a Delaware limited liability company and indirect wholly owned subsidiary of Authentic Brands Group, entered into the Sports Illustrated Licensing Agreement, pursuant to which the Company has the exclusive right and license in the United States, Canada, Mexico, United Kingdom, Republic of Ireland, Australia, and New Zealand to operate the Sports Illustrated media business (in the English and Spanish languages), including to (i) operate the digital and print editions of Sports Illustrated (including all special interest issues and the swimsuit issue) and Sports Illustrated for Kids, (ii) develop new digital media channels under the Sports Illustrated brands, and (iii) operate certain related businesses, including without limitation, special interest publications, video channels, bookazines and the licensing and/or syndication of certain products and content under the Sports Illustrated brand (collectively, the “Sports Illustrated Licensed Brands”).
The initial term of the Sports Illustrated Licensing Agreement commenced on October 4, 2019 upon the termination of the Meredith License Agreement (as defined below) and continues through December 31, 2029. The Company has the option, subject to certain conditions, to renew the term of the Sports Illustrated Licensing Agreement for nine consecutive renewal terms of 10 years each (collectively with the initial term, the “Term”), for a total of 100 years. The Sports Illustrated Licensing Agreement provides that the Company will pay to ABG annual royalties in respect of each year of the Term based on gross revenues (“Royalties”) with guaranteed minimum annual amounts. On the execution of the Sports Illustrated Licensing Agreement, the Company prepaid ABG $45,000,000 against future Royalties upon (see Note 5). In addition, ABG will pay to the Company a share of revenues relating to certain Sports Illustrated business lines not licensed to the Company, such as all gambling-related advertising and monetization, events, and commerce. The Company funded the prepaid Royalties from the net proceeds from the 12% Senior Secured Notes financing (as described in Note 19). The Company entered into the Licensing Agreement as part of its growth strategy to serve as a cornerstone of vertical content.
Pursuant to a publicly announced agreement, dated May 24, 2019, between ABG and Meredith, Meredith previously operated the Sports Illustrated Licensed Brands under license from ABG (the “Meredith License Agreement”). On October 3, 2019, Maven and Meredith entered into a Transition Services Agreement and an Outsourcing Agreement (collectively, the “Transition Agreement”), whereby the parties agreed to the terms and conditions under which Meredith continued to operate certain aspects of the business and provide certain services during the fourth quarter of 2019 as all activities were transitioned over to Maven. Through these agreements, Maven took over operating control of the Sports Illustrated Licensed Brands, and the Transition Agreement was terminated.
In connection with the Sports Illustrated Licensing Agreement, the Company issued ABG warrants to acquire common stock of the Company (the “ABG Warrants”) for performance of future services (see Note 22).
As consideration for entering into the Licensing Agreement, the Company agreed to retain the responsibility and lead the negotiations with Meredith to provide for the transfer of the Sports Illustrated Licensed Brands from Meredith, including an arrangement where Meredith retains responsibility for producing and distributing the physical publications Sports Illustrated and Sports Illustrated for Kids (the “Magazines”) and subscriber marketing, as well as to retain responsibility for paying the deferred subscription revenue, described in the Sports Illustrated Licensing Agreement, as the total liability to subscribers to fulfill unfulfilled subscriptions to the print and electronic editions of the Magazines, accrued as of October 4, 2019, and the obligation to issue to each subscriber requesting a refund in connection therewith the amount of such liability owing to that subscriber. No cash was paid to ABG in connection with the Sports Illustrated Licensing Agreement.
The Company concluded that the Sports Illustrated Licensing Agreement entered into to conduct the licensed brands was an asset acquisition in accordance with ASC 805, Business Combinations, Subtopic 50, Related Issues (ASC 805-50), as substantially all of the fair value of the gross assets acquired by the Company is concentrated in a group of similar identifiable assets. All direct acquisition related costs of $331,026 are assigned to the assets in relation to the relative fair value of the acquired assets and recorded as part of the consideration transferred.
| F-29 |
In accordance with the above guidance, the fair value of the assets acquired and liabilities assumed at the effective date of the acquisition based upon their respective fair values are summarized below:
| Accounts receivable | $ | 337,481 | ||
| Prepaid expenses | 1,534,922 | |||
| Subscriber relationships | 71,308,799 | |||
| Other current liabilities | (632,056 | ) | ||
| Unearned revenues | (47,249,470 | ) | ||
| Subscription refund liability | (5,427,523 | ) | ||
| Deferred tax liabilities | (19,541,127 | ) | ||
| Net assets acquired | $ | 331,026 |
The Company utilized an independent appraisal, as well as other available market data, to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair value of the intangible asset was determined by an independent appraisal in accordance with ASC 805-50 by allocating the fair value of an assumed liability to the individual assets acquired based on their relative fair values, with the fair value of the assumed liabilities (or unearned revenues and subscription refund liability) assigned to the subscriber relationships asset as the subscribers are sufficiently similar and can be valued together as a single identifiable asset acquired. The fair value of the unearned revenues was determined with the following inputs: (1) projection of when unearned revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate. The fair value of the subscription refund liability was established based upon the historical return rates for specific products. The subscriber relationships (the customer-based intangible assets) useful life was determined by establishing the average term of the issues served taking into account expected subscription renewals, which is five years (5.0 years).
The Company concluded and recognized deferred tax liabilities, consistent with the guidance for an asset acquisition, at the Licensing Agreement effective date in accordance with ASC 740, Income Taxes, based on the difference between the book and tax basis of the assets acquired calculated under the simultaneous equation model using the initial measurement guidance in accordance with ASC 805.
| 4. | Prepayments and Other Current Assets |
Prepayments and other current assets are summarized as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Prepaid expenses | $ | 3,400,080 | $ | 3,370,757 | ||||
| Prepaid software license | 378,488 | 89,822 | ||||||
| Refundable income and franchise taxes | 733,553 | 733,553 | ||||||
| Security deposits | 92,494 | 96,135 | ||||||
| Other receivables | 62,648 | 20,468 | ||||||
| $ | 4,667,263 | $ | 4,310,735 | |||||
| 5. | Royalty Fees |
As of December 31, 2020 and 2019, $26,250,000 and $41,250,000, respectively, of prepaid Royalties fees was unamortized from the $45,000,000 guaranteed minimum annual Royalties that was paid to ABG in connection with the Sports Illustrated Licensing Agreement. The Royalties are being recognized over a period of three-years starting October 4, 2019. As of December 31, 2020 and 2019, the current portion of $15,000,000 was reflected within royalty fees on the consolidated balance sheets and the long-term portion of $11,250,000 and $26,250,000, respectively, was reflected within royalty fees, net of current portion on the consolidated balance sheets.
| F-30 |
| 6. | Property and Equipment |
Property and equipment are summarized as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Office equipment and computers | $ | 1,341,292 | $ | 476,233 | ||||
| Furniture and fixtures | 19,997 | 193,914 | ||||||
| Leasehold improvements | 345,516 | 307,550 | ||||||
| 1,706,805 | 977,697 | |||||||
| Less accumulated depreciation and amortization | (577,367 | ) | (316,420 | ) | ||||
| Net property and equipment | $ | 1,129,438 | $ | 661,277 | ||||
Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $638,796 and $276,791, respectively. Depreciation and amortization expense is included in selling and marketing expenses and general and administrative expenses, as appropriate, on the consolidated statements of operations. No impairment charges have been recorded in the periods presented.
| 7. | Leases |
The Company adopted the comprehensive new lease accounting standard effective January 1, 2019 using the modified retrospective transition method. The Company elected the package of practical expedients under the new lease standards, which includes (i) not reassessing whether any expired or existing contracts are or contain a lease, (ii) not reassessing lease classification for any expired or existing leases, (iii) not reassessing initial direct costs for any existing leases, and (iv) account for a lease and non-lease component as a single component for certain classes of assets. The Company will not adopt the practical expedient to use hindsight in determining the lease term. Adoption of the new standard resulted in recording operating lease right-of-use assets and operating lease liabilities of on the consolidated balance sheets. The adoption of the standard was immaterial and did not result in an impact as of January 1, 2019. The standard did not have a material impact on the consolidated statements of operations or consolidated statements of cash flows.
The Company’s leases are primarily comprised of real estate leases for the use of office space, with certain lease arrangements that contain equipment. The Company determines whether an arrangement contains a lease at inception. Lease assets and liabilities are recognized upon commencement of the lease based on the present value of the future minimum lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise that option. Substantially all of the leases are long-term operating leases for facilities with fixed payment terms between 1.5 and 12.8 years, which expire at various dates through 2032.
The table below presents supplemental information related to operating leases:
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Operating lease costs during the year | $ | 4,054,423 | $ | 1,112,362 | ||||
| Cash payments included in the measurement of operating lease liabilities during the year | $ | 3,188,986 | $ | 1,212,800 | ||||
| Operating lease liabilities arising from obtaining lease right-of-use assets during the year | $ | 16,617,790 | $ | 3,853,500 | ||||
| Weighted-average remaining lease term (in years) as of year-end | 11.25 | 5.03 | ||||||
| Weighted-average discount rate during the year | 13.57 | % | 9.85 | % | ||||
As most of the Company’s leases do not provide an implicit rate, the Company is required to use its incremental borrowing rate. The Company uses an incremental borrowing rate based on the information available at the lease commencement date to determine present value of lease payments. The incremental borrowing rate used is the rate the Company would have to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
| F-31 |
On February 7, 2020, under the terms of the first amendment to the 12% Amended Senior Secured Notes (as further amended and described in Note 19), BRF Finance Co., LLC (“BRF Finance”), an affiliated entity of B. Riley, issued a letter of credit for $3,024,232 to one of the Company’s landlords. In the event BRF Finance is required to make a draw on the letter of credit, the amount paid will automatically be added to principal of the outstanding notes. As of December 31, 2020 and 2019, security deposits under letters of credit or cash deposited with banks under the terms of the lease arrangements were $185,606 and $160,910, respectively, reflected within other assets on the consolidated balance sheets.
Maturity of Lease Liabilities
The present value of the Company’s operating leases consisted of the following as of December 31, 2020:
| Year Ending December 31, | ||||
| 2021 | $ | 3,804,853 | ||
| 2022 | 3,525,158 | |||
| 2023 | 3,528,696 | |||
| 2024 | 3,526,406 | |||
| 2025 | 3,740,591 | |||
| Thereafter | 23,822,981 | |||
| Minimum lease payments | 41,948,685 | |||
| Less imputed interest | (21,002,931 | ) | ||
| Present value of operating lease liabilities | $ | 20,945,754 | ||
| Current portion of operating lease liabilities | $ | 1,059,671 | ||
| Long-term portion of operating lease liabilities | 19,886,083 | |||
| Total operating lease liabilities | $ | 20,945,754 |
| 8. | Platform Development |
Platform development costs are summarized as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Platform development | $ | 16,027,428 | $ | 10,678,692 | ||||
| Less accumulated amortization | (8,671,820 | ) | (4,785,973 | ) | ||||
| Net platform development | $ | 7,355,608 | $ | 5,892,719 | ||||
A summary of platform development activity for the years ended December 31, 2020 and 2019 is as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Platform development beginning of year | $ | 10,678,692 | $ | 6,833,900 | ||||
| Payroll-based costs capitalized during the year | 3,750,541 | 2,537,402 | ||||||
| Total capitalized costs | 14,429,233 | 9,371,302 | ||||||
| Stock-based compensation | 1,608,995 | 1,307,390 | ||||||
| Dispositions during the year | (10,800 | ) | - | |||||
| Platform development end of year | $ | 16,027,428 | $ | 10,678,692 | ||||
Amortization expense for platform development for the years ended December 31, 2020 and 2019, was $3,890,966 and $2,660,029, respectively, is included within cost of revenues on the consolidated statements of operations.
| F-32 |
| 9. | Intangible Assets |
Intangible assets subject to amortization consisted of the following:
| Weighted Average | As of December 31, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||
| Useful Life (in years) | Carrying Amount | Accumulated Amortization | Net Carrying Amount | Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||
| Developed technology | 4.70 | $ | 19,070,857 | $ | (8,283,740 | ) | $ | 10,787,117 | $ | 19,138,104 | $ | (4,090,359 | ) | $ | 15,047,745 | |||||||||||
| Noncompete agreement | 2.00 | 480,000 | (480,000 | ) | - | 480,000 | (252,000 | ) | 228,000 | |||||||||||||||||
| Trade name | 16.63 | 3,328,000 | (503,342 | ) | 2,824,658 | 3,328,000 | (224,745 | ) | 3,103,255 | |||||||||||||||||
| Subscriber relationships | 5.10 | 73,458,799 | (18,105,041 | ) | 55,353,758 | 73,458,799 | (3,587,837 | ) | 69,870,962 | |||||||||||||||||
| Advertiser relationships | 9.42 | 2,240,000 | (332,515 | ) | 1,907,485 | 2,240,000 | (94,635 | ) | 2,145,365 | |||||||||||||||||
| Database | 3.00 | 1,140,000 | (531,183 | ) | 608,817 | 1,140,000 | (151,183 | ) | 988,817 | |||||||||||||||||
| Subtotal amortizable intangible assets | 99,717,656 | (28,235,821 | ) | 71,481,835 | 99,784,903 | (8,400,759 | ) | 91,384,144 | ||||||||||||||||||
| Website domain name | - | 20,000 | - | 20,000 | 20,000 | - | 20,000 | |||||||||||||||||||
| Total intangible assets | $ | 99,737,656 | $ | (28,235,821 | ) | $ | 71,501,835 | $ | 99,804,903 | $ | (8,400,759 | ) | $ | 91,404,144 | ||||||||||||
Developed technology, noncompete agreement, trade name, subscriber relationships, advertiser relationships, and database intangible assets subject to amortization were recorded as part of the Company’s business acquisitions. The website domain name has an infinite life and is not being amortized. Amortization expense for the years ended December 31, 2020 and 2019 was $20,301,665 and $7,806,517, respectively. Amortization expense for developed technology and platform development of $4,659,986 and $3,531,936 for the years ended December 31, 2020 and 2019, respectively, are included within cost of revenues on the consolidated statements of operations. No impairment charges have been recorded during the years ended December 31, 2020 and 2019.
Estimated total amortization expense for the next five years and thereafter related to the Company’s intangible assets subject to amortization as of December 31, 2020 is as follows:
| Year Ending December 31, | ||||
| 2021 | $ | 19,803,965 | ||
| 2022 | 19,209,117 | |||
| 2023 | 17,460,073 | |||
| 2024 | 11,397,870 | |||
| Thereafter | 3,610,810 | |||
| $ | 71,481,835 | |||
| 10. | Other Assets |
Other assets are summarized as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Security deposit | $ | 110,418 | $ | 110,418 | ||||
| Other deposits | 15,400 | 65,764 | ||||||
| Prepaid expenses | 732,309 | 867,467 | ||||||
| Note receivable | - | 41,638 | ||||||
| Prepaid supplies | 472,685 | - | ||||||
| $ | 1,330,812 | $ | 1,085,287 | |||||
| F-33 |
| 11. | Goodwill |
The changes in carrying value of goodwill as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Carrying value at beginning of year | $ | 16,139,377 | $ | 7,324,287 | ||||
| Goodwill acquired in acquisition of TheStreet | - | 8,815,090 | ||||||
| Carrying value at end of year | $ | 16,139,377 | $ | 16,139,377 | ||||
The Company performs its annual impairment test at the reporting unit level, which is the operating segment or one level below the operating segment. Management determined that the Company would be aggregated into a single reporting unit for purposes of performing the impairment test for goodwill.
For the years ended December 31, 2020 and 2019, the Company as part of its annual evaluations utilized the option to first assess qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment assessment. As part of this assessment, the Company reviews qualitative factors which include, but are not limited to, economic, market and industry conditions, as well as the financial performance of its reporting unit. In accordance with applicable guidance, an entity is not required to calculate the fair value of its reporting unit if, after assessing these qualitative factors, the Company determines that it is more likely than not that the fair value of its reporting unit is greater than its respective carrying amount. The annual impairment test was performed on December 31, 2020. No impairment of goodwill has been identified during the years ended December 31, 2020 and 2019.
| 12. | Restricted Stock Liabilities |
On December 15, 2020, the Company entered into an amendment for certain restricted stock awards and units that were previously issued to certain employees in connection with the HubPages merger. Pursuant to the amendment:
| ● | the restricted stock awards ceased to vest and all unvested shares were deemed unvested and forfeited, leaving an aggregate of 1,064,549 shares vested; | |
| ● | the restricted stock units were modified to vest on December 31, 2020, and as of the close of business on December 31, 2020, each restricted stock unit was terminated and deemed forfeited, with no shares vesting thereunder; and | |
| ● | subject to certain conditions, the Company agreed to purchase the vested restricted stock awards and restricted stock units, at a price of $4.00 per share in 24 equal monthly installments on the second business day of each calendar month beginning on January 4, 2021. |
As a result of the modification of the equity-based awards, the Company recognized $334,328 of incremental stock-based compensation costs at the time of the modification and recorded $3,800,734 as a reclassification of restricted stock awards and units from equity to liability classified upon modification, as reflected within additional paid-in capital on the consolidated statements of stockholders’ deficiency.
The following table presents the components of the restricted stock liabilities as of December 31, 2020:
| Restricted stock liabilities recorded upon modification of the restricted stock awards and units (1,064,549 restricted stock to be purchased at $4.00 per share) | $ | 4,258,196 | ||
| Less imputed interest | (457,462 | ) | ||
| Present value of restricted stock liabilities | 3,800,734 | |||
| Less prepayments on December 31, 2020 | (177,425 | ) | ||
| Restricted stock liabilities | $ | 3,623,309 | ||
| Current portion of restricted stock liabilities | $ | 1,627,499 | ||
| Long-term portion of restricted stock liabilities | 1,995,810 | |||
| Total restricted stock liabilities | $ | 3,623,309 |
| F-34 |
| 13. | Accrued Expenses |
Accrued expenses are summarized as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| General accrued expenses | $ | 4,116,875 | $ | 7,665,518 | ||||
| Accrued payroll and related taxes | 2,519,903 | 968,782 | ||||||
| Accrued publisher expenses | 3,956,114 | 1,550,669 | ||||||
| Sales tax liability | 1,063,515 | 801,930 | ||||||
| Due to Meredith | - | 701,734 | ||||||
| Due to ABG | - | 4,000,000 | ||||||
| Restricted stock liabilities | 1,627,499 | - | ||||||
| Other | 1,434,287 | 794,568 | ||||||
| $ | 14,718,193 | $ | 16,483,201 | |||||
| 14. | Line of Credit |
FastPay Credit Facility – On February 27, 2020, the Company entered into a financing and security agreement with FPP Finance LLC (“FastPay”), pursuant to which FastPay extended a $15,000,000 line of credit for working capital purposes secured by a first lien on all of the Company’s cash and accounts receivable and a second lien on all other assets. Borrowings under the facility bear interest at the LIBOR Rate plus 8.50% and have a final maturity of February 6, 2022. As of December 31, 2020, the balance outstanding under the FastPay facility was $7,178,791. As of the date these condensed consolidated financial statements were issued or were available to be issued the balance outstanding was approximately $6.5 million.
SallyPort Credit Facility – During November 2018, the Company entered into a factoring note agreement, with a $3,500,000 maximum facility limit, with Sallyport Commercial Finance, LLC (“Sallyport”) to increase working capital through accounts receivable factoring. The note provided for maximum borrowing up to 85% of the eligible accounts receivable (the “Advance Rate”) and the Company was permitted to adjust the amount advanced up or down at any time. The note was subject to a minimum monthly sales shortfall fee in the event the monthly sales volume is below $1,000,000. The note bore interest at the prime rate plus 4.00% (the “Interest Rate”) (8.75% as of December 31, 2019) and provided for a floor rate of 5.00% with a default rate of 3.00% plus the Interest Rate. In addition, the note provided for an initial factoring fee of 0.415% with an annual per day fee of $950. As of December 31, 2019, Sallyport collected accounts receivable in excess of the balance outstanding under the note, therefore, the Company was due $626,532 from Sallyport which was reflected within accounts receivable on the condensed consolidated balance sheet. Effective January 30, 2020, the Company’s factoring facility with Sallyport was closed and funds were no longer available for advance.
| 15. | Liquidated Damages Payable |
Liquidated Damages payable are summarized as follows:
| As of December 31, 2020 | ||||||||||||||||||||||||
| MDB Common Stock to be Issued (1) | Series H Preferred Stock | 12%
Convertible Debentures | Series I Preferred Stock | Series J Preferred Stock | Total | |||||||||||||||||||
| Registration Rights Damages | $ | 15,001 | $ | 1,163,955 | $ | - | $ | 1,386,000 | $ | 1,200,000 | $ | 3,764,956 | ||||||||||||
| Public Information Failure Damages | - | 1,163,955 | 905,490 | 1,386,000 | 1,200,000 | 4,655,445 | ||||||||||||||||||
| Accrued interest | - | 481,017 | 134,466 | 332,185 | 200,022 | 1,147,690 | ||||||||||||||||||
| $ | 15,001 | $ | 2,808,927 | $ | 1,039,956 | $ | 3,104,185 | $ | 2,600,022 | $ | 9,568,091 | |||||||||||||
| F-35 |
| As of December 31, 2019 | ||||||||||||||||||||||||
| MDB Common Stock to be Issued (1) | Series H Preferred Stock | 12%
Convertible Debentures | Series I Preferred Stock | Series J Preferred Stock | Total | |||||||||||||||||||
| Registration Rights Damages | $ | 15,001 | $ | 1,163,955 | $ | - | $ | 1,108,800 | $ | 840,000 | $ | 3,127,756 | ||||||||||||
| Public Information Failure Damages | - | 1,163,955 | 893,190 | 1,039,500 | 840,000 | 3,936,645 | ||||||||||||||||||
| Accrued interest | - | 481,017 | 132,888 | 262,193 | 140,015 | 1,016,113 | ||||||||||||||||||
| $ | 15,001 | $ | 2,808,927 | $ | 1,026,078 | $ | 2,410,493 | $ | 1,820,015 | $ | 8,080,514 | |||||||||||||
| (1) Consists of shares of common stock issuable to MDB Capital Group, LLC (“MDB”). |
Information with respect to the Liquidated Damages recognized on the consolidated statements of operations is provided in Note 23, and for amounts contingently liable in Note 26.
| 16. | Fair Value Measurements |
The Company’s financial instruments consist of Level 1, Level 2 and Level 3 assets as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the Company’s cash and cash equivalents of $9,033,872 and $8,852,281, respectively, were Level 1 assets and included savings deposits, overnight investments, and other liquid funds with financial institutions.
Financial instruments measured at fair value during the year consisted of the following as of December 31, 2020 and 2019:
| Year Ended December 31, 2020 | ||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Long-term debt: | ||||||||||||||||
| 12% Amended Senior Secured Notes | $ | 52,556,401 | $ | - | $ | 52,556,401 | $ | - | ||||||||
| Warrant derivative liabilities: | ||||||||||||||||
| Strome Warrants | $ | 704,707 | $ | - | $ | - | $ | 704,707 | ||||||||
| B. Riley Warrants | 443,188 | - | - | 443,188 | ||||||||||||
| Total warrant derivative liabilities | $ | 1,147,895 | $ | - | $ | - | $ | 1,147,895 | ||||||||
| Year Ended December 31, 2019 | ||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Long-term debt: | ||||||||||||||||
| 12% Amended Senior Secured Notes | $ | 44,009,745 | $ | - | $ | 44,009,745 | $ | - | ||||||||
| Warrant derivative liabilities: | ||||||||||||||||
| Strome Warrants | $ | 1,036,687 | $ | - | $ | - | $ | 1,036,687 | ||||||||
| B. Riley Warrants | 607,513 | - | - | 607,513 | ||||||||||||
| Total warrant derivative liabilities | $ | 1,644,200 | $ | - | $ | - | $ | 1,644,200 | ||||||||
| Embedded derivative liabilities | $ | 13,501,000 | $ | - | $ | - | $ | 13,501,000 | ||||||||
The carrying value of the Company’s 12% Amended Senior Secured Notes (as defined below) approximates fair value based on current market interest rates for debt instruments of similar credit standing and, consequently, their fair values are based on Level 2 inputs.
The quantitative information utilized in the fair value calculation of the Level 3 liabilities are as follows:
The Company accounts for certain warrants and the embedded conversion features of the 12% Convertible Debentures (as described in Note 18) as derivative liabilities, which require the Company carry such amounts on its consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end.
The Company determined the fair value of the L2 Warrants, Strome Warrants and B. Riley Warrants (all as described in Note 21) utilizing the Black-Scholes valuation model as further described below. These warrants and the embedded conversion features are classified as Level 3 within the fair-value hierarchy. Inputs to the valuation model include the Company’s publicly-quoted stock price, the stock volatility, the risk-free interest rate, the remaining life of the warrants and debentures, the exercise price or conversion price, and the dividend rate. The Company uses the closing stock price of its common stock over an appropriate period of time to compute stock volatility. These assumptions are summarized as follows:
| F-36 |
L2 Warrants – 2019 assumptions: Black-Scholes option-pricing; expected life: 3.75 years; risk-free interest rate: 1.56%; volatility factor: 130.46%; dividend rate: 0.0%; transaction date closing market price: $0.89; exercise price: $0.50.
Strome Warrants – 2020 assumptions: Black-Scholes option-pricing; expected life: 2.45; risk-free interest rate: 0.13%; volatility factor: 150.55%; dividend rate: 0.0%; transaction date closing market price: $0.60; exercise price: $0.50; and 2019 assumptions: Black-Scholes option-pricing; expected life: 3.45; risk-free interest rate: 1.62%; volatility factor: 144.56%; dividend rate: 0.0%; transaction date closing market price: $0.80; exercise price: $4.50.
B. Riley Warrants – 2020 assumptions: Black-Scholes option-pricing; expected life: 4.79 years; risk-free interest rate: 0.36%; volatility factor: 140.95%; dividend rate: 0.0%; transaction date closing market price: $0.60; exercise price: $1.00; and 2019 assumptions: Black-Scholes option-pricing; expected life: 5.80 years; risk-free interest rate: 1.76%; volatility factor: 127.63%; dividend rate: 0.0%; transaction date closing market price:$0.80; exercise price: $1.00.
The following table represents the carrying amount, valuation and roll-forward of activity for the Company’s warrants accounted for as a derivative liability and classified within Level 3 of the fair-value hierarchy as of and for the years ended December 31, 2020 and 2019:
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Carrying amount at beginning of year: | ||||||||
| L2 Warrants | $ | - | $ | 418,214 | ||||
| Strome Warrants | 1,036,687 | 587,971 | ||||||
| B. Riley Warrants | 607,513 | 358,050 | ||||||
| Subtotal carrying amount at beginning of year | 1,644,200 | 1,364,235 | ||||||
| Change in valuation of warrant derivative liabilities: | ||||||||
| L2 Warrants | - | 316,972 | ||||||
| Strome Warrants | (331,980 | ) | 448,716 | |||||
| B. Riley Warrants | (164,325 | ) | 249,463 | |||||
| Subtotal change in valuation during the year | (496,305 | ) | 1,015,151 | |||||
| Exercise of warrants during the year: | ||||||||
| L2 Warrants | - | 735,186 | ||||||
| Carrying amount at end of year: | ||||||||
| Strome Warrants | 704,707 | 1,036,687 | ||||||
| B. Riley Warrants | 443,188 | 607,513 | ||||||
| Carrying amount at end of year | $ | 1,147,895 | $ | 1,644,200 | ||||
For the years ended December 31, 2020 and 2019, the change in valuation of warrant derivative liabilities recognized within other (expense) income on the consolidated statement of operations, as described in the above table of $496,305 and ($1,015,151), respectively. The L2 Warrants were fully exercised on a cashless basis during the year ended December 31, 2019, resulting in a $735,186 offset within additional paid-in capital on the consolidated statements of stockholders’ deficiency.
| F-37 |
The following table represents the carrying amount, valuation and a roll-forward of activity for the conversion option features, buy-in features, and default remedy features, as deemed appropriate for each instrument (collectively the embedded derivative liabilities), for the 12% Convertible Debentures (refer to Note 18) accounted for as embedded derivative liabilities and classified within Level 3 of the fair-value hierarchy as of and for the years ended December 31, 2020 and 2019:
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Recognition of embedded derivative liabilities (conversion feature, buy-in feature, and default remedy feature): | ||||||||
| Carrying amount at beginning of year | $ | 13,501,000 | $ | 7,387,000 | ||||
| Issuance date of March 18, 2019 | - | 822,000 | ||||||
| Issuance date of March 27, 2019 | - | 188,000 | ||||||
| Issuance date of April 8, 2019 | - | 64,000 | ||||||
| Change in fair value of embedded derivative liabilities | (2,571,004 | ) | 5,040,000 | |||||
| Fair value of embedded derivative liabilities recorded within additional paid-capital upon conversion of 12% convertible debentures | (10,929,996 | ) | - | |||||
| Carrying amount at end of year | $ | - | $ | 13,501,000 | ||||
For the year ended December 31, 2020, the change in valuation of embedded derivative liabilities as described in the above table of $2,571,004 was recognized as other income on the consolidated statements of operations. For the year ended December 31, 2019, the change in valuation of embedded derivative liabilities as described in the above table of $5,040,000 was recognized as other expense on the consolidated statements of operations.
In addition, the fair value requirement at each period-end for the Series G Preferred Stock embedded conversion feature was no longer required for the year ended December 31, 2019 since it is not considered a derivative liability, therefore, the carrying amount of $72,563 as of January 1, 2018 was recognized as other income of $72,563 during the year ended December 31, 2019 on the consolidated statements of operations.
As a result of the conversion of certain 12% Convertible Debentures into shares of the Company’s common stock, the Company recorded the fair value of the embedded derivative liabilities of the conversion option features, buy-in features, and default remedy features of $10,929,996 within additional paid-in capital on the consolidated statements of stockholders’ deficiency (as further described in Note 18).
There have been no transfers in Level 1, Level 2, and Level 3 and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2020 and 2019.
| 17. | Promissory Notes |
In May 2018, the Company’s then Chief Executive Officer began advancing funds to the Company in order to meet minimum operating needs. Such advances were made pursuant to promissory notes that were due on demand, with interest at the minimum applicable federal rate, which ranged from 2.18% to 2.38%. As of December 31, 2019, the total principal amount of advances outstanding were $319,351 (including accrued interest of $12,574) (see Note 25). As of December 31, 2020, the note was repaid (further details are provided in Note 20).
| 18. | Convertible Debt |
During 2018 and 2019, the Company had various financings through the issuance of the 12% senior subordinated convertible debentures which were due and payable on December 31, 2020 (the “12% Convertible Debentures”). Interest accrued at the rate of 12% per annum, payable on the earlier of conversion or December 31, 2020. The Company’s obligations under the 12% Convertible Debentures were secured by a security agreement, dated as of October 18, 2018, by and among the Company and each investor thereto. The 12% Convertible Debentures were subject to the Company receiving stockholder approval to increase its authorized shares of common stock before conversion. Principal on the 12% Convertible Debentures were convertible into shares of the Company’s common stock, at the option of the investor at any time prior to December 31, 2020, at either a per share conversion price of $0.33 (with respect to the 12% Convertible Debentures issued in 2018) or $0.40 (with respect to the 12% Convertible Debentures issued in 2019), subject to adjustment for stock splits, stock dividends and similar transactions, and certain beneficial ownership blocker provisions. Further, the 12% Convertible Debentures were subject to Liquidated Damages (as further described below and in Note 23 and Note 26).
| F-38 |
The 12% Convertible Debentures were issued and convertible into shares of the Company’s common stock as follows: (1) gross proceeds of $13,091,528 on December 12, 2018, convertible into 39,671,297 shares; (2) gross proceeds of $1,696,000 on March 18, 2019, convertible into 4,240,000 shares; (3) gross proceeds of $318,000 on March 27, 2019, convertible into 795,000 shares; and (4) gross proceeds of $100,000 on April 8, 2019, convertible into 250,000 shares. Upon issuance of the various financings, the Company accounted for the embedded conversion option feature, buy-in feature, and default remedy feature (as further described below and in Note 16) as embedded derivative liabilities, which required the Company to carry such amount on its consolidated balance sheets as a liability at fair value, as adjusted at each period-end (see Note 16).
The Company also incurred debt issuance cost. The embedded derivative liabilities and debt issuance cost were treated as a debt discount and amortized over the term of the debt.
The 12% Convertible Debentures issued during the year ended December 31, 2019 were as follows:
On March 18, 2019, the Company entered into a securities purchase agreement with two accredited investors, including John Fichthorn, the Company’s Executive Chairman of the Board of Directors (the “Board”), pursuant to which the Company issued 12% Convertible Debentures in the aggregate principal amount of $1,696,000, which included a placement fee of $96,000 paid to B. Riley FBR in the form of a 12% Convertible Debenture, for acting as the Company’s placement agent in the offering. The Company received net proceeds of $1,600,000 and paid legal fees and expenses of $10,000 in cash. This financing of the 12% Convertible Debentures was subject to an issuance limitation, which fully limited the conversion of the 12% Convertible Debentures into shares of common stock by the holders (outside of the issuance limitation these 12% Convertible Debentures were convertible into 4,240,000 shares of the Company’s common stock), subject to certain conditions as described below.
On March 27, 2019, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued 12% Convertible Debentures in the aggregate principal amount of $318,000, which included a placement fee of $18,000 paid to B. Riley FBR in the form of a 12% Convertible Debenture for acting as the Company’s placement agent in the offering. The Company received net proceeds of $300,000. This financing of the 12% Convertible Debentures was subject to an issuance limitation, which fully limited the conversion of the 12% Convertible Debentures into shares of common stock by the holder (outside of the issuance limitation these 12% Convertible Debentures were convertible into 795,000 shares of the Company’s common stock), subject to certain conditions as described below.
On April 8, 2019, the Company entered into a securities purchase agreement with an accredited investor, Todd D. Sims, a member of the Board, pursuant to which the Company issued a 12% Convertible Debenture in the aggregate principal amount of $100,000 and received $100,000 from the proceeds. This financing of the 12% Convertible Debenture was subject to an issuance limitation, which fully limited the conversion of the 12% Convertible Debentures into shares of common stock by the holder (outside of the issuance limitation this 12% Convertible Debenture was convertible into 250,000 shares of the Company’s common stock), subject to certain conditions as described below.
Upon issuance of the various financings of the 12% Convertible Debentures, the Company recognized the following embedded derivative liabilities that were bifurcated from the note instruments:
| ● | Conversion option – (1) At any time after the original issue date until the 12% Convertible Debenture is no longer outstanding, the 12% Convertible Debenture is convertible, in whole or in part, into shares of common stock at the option of the holder at the aforementioned conversion price, and (2) at any time and from time to time subject to: (i) an issuance limitation until the Company has an authorized share increase, and (ii) a beneficial ownership limitations, which prevents conversion if the common stock shares held by the holder exceeds 4.99% of the common stock outstanding (subject to increase by the holder to 9.99%). | |
| ● | Buy-in feature – (1) The 12% Convertible Debenture is puttable for a certain buy-in amount where it gives the holder the right, if the Company fails for any reason to deliver to the holder the conversion shares, to a cash settlement for the difference between the cost of the Company’s common stock in the open market and the conversion price; and (2) the put is contingent if the Company fails to deliver conversion shares pursuant to a buy-in event. |
| F-39 |
| ● | Default remedy feature – (1) The 12% Convertible Debenture is puttable in the event of default where it gives the holder the right to repayment, in cash, the greater of (i) the outstanding principal amount due divided by the then conversion price times the daily volume weighted average price of the common stock; or (ii) the outstanding principal debt amount, plus unpaid but accrued interest and other amounts owing in the notes; and (2) the put is contingent upon a Change of Control (as described below) or Fundamental Transaction (as described below). |
Change in Control – Change in Control, in general, means: (a) an acquisition in excess of 50% of the voting securities of the Company; (b) the Company merges into or consolidates whereby the Company stockholders own less than 50% of the aggregate voting power after the transaction; (c) the Company sells or transfers all or substantially all of its assets to whereby the Company stockholders own less than 50% of the aggregate voting power after the transaction; (d) a replacement at one time or within a three year period of more than one-half of the Board, which is not approved by a majority of those individuals who are members of the Board on the original issue date, subject to certain conditions; or (e) the execution by the Company of an agreement for any of the events set forth in clauses (a) through (d) above.
Fundamental Transaction – Fundamental Transaction, in general, means: (a) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation; (b) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions; (c) any, direct or indirect, purchase offer, tender offer or exchange offer is completed pursuant to which the Company common stock holders are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the Company’s outstanding common stock; (d) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Company’s common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property, or (e) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination whereby such transaction results in an acquisition of more than 50% of the outstanding shares of the Company’s common stock, subject to certain other conditions. Further, if a Fundamental Transaction occurs, the holders have the right to their conversion shares as if the beneficial ownership limitation or the issuance limitation was not in place, subject to certain terms as additional consideration.
The 12% Convertible Debentures also provided that as long as the debt remains outstanding, unless investors holding at least 51% in principal amount of the then-outstanding 12% Convertible Debentures otherwise agree, the Company was not permitted to enter into, incur, assume or guarantee any indebtedness, except for certain permitted indebtedness.
Pursuant to the registration rights agreements entered into in connection with the securities purchase agreements, the Company agreed to register the shares issuable upon conversion of the 12% Convertible Debentures for resale by the holders within a certain timeframe and subject to certain conditions. The registration rights agreement provides for a cash payment equal to 1.0% per month of the amount invested as partial liquidated damages upon the occurrence of certain events, on each monthly anniversary, up to a maximum amount of 6.0% of the aggregate amount invested, subject to interest at 12.0% per annum, accruing daily, until paid in full. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
The securities purchase agreements also included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement after 6 months of the closing date, then the Company will be obligated to pay to each holder a cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. The securities purchase agreements provide for Public Information Failure Damages (further details are provided in Note 15).
| F-40 |
The Company recognized a portion of the Public Information Failure Damages pursuant to the securities purchase agreements in connection with the 12% Convertible Debentures at the time of issuance as it was deemed probable the obligations would not be satisfied when the financings were completed (see Note 15 and Note 26).
On December 31, 2020, certain holders converted the 12% Convertible Debentures representing an aggregate of $18,104,949 of the then-outstanding principal and accrued but unpaid interest into 53,887,470 shares of the Company’s common stock at effective conversion per-share prices ranging from $0.33 to $0.40. Further, the Company repaid an aggregate of $1,130,903 of the 12% Convertible Debentures, including the then-outstanding principal and accrued interest, in cash. With respect to the conversion of the accrued interest into shares of the Company’s common stock, the Company recognized a loss on conversion of $3,297,539 at the time of conversion on the consolidated statements of operations. Upon conversion of the 12% Convertible Debentures, the Company recorded the aggregate outstanding principal and loss on conversion of the accrued interest of $21,402,488 within additional paid-capital on the consolidated statements of stockholders’ deficiency.
The following table represents the various financings of the 12% Convertible Debentures recognized during the year ended December 31, 2019 and carrying value as of December 31, 2019:
| Issuance Date | Total 12% | |||||||||||||||||||
| December 12, 2018 | March 18, 2019 | March 27, 2019 | April 8, 2019 | Convertible Debentures | ||||||||||||||||
| Principal amount of debt | $ | 9,540,000 | $ | 1,696,000 | $ | 318,000 | $ | 100,000 | $ | 11,654,000 | ||||||||||
| Less issuance costs | (590,000 | ) | (96,000 | ) | (18,000 | ) | - | (704,000 | ) | |||||||||||
| Net cash proceeds received | $ | 8,950,000 | $ | 1,600,000 | $ | 300,000 | $ | 100,000 | $ | 10,950,000 | ||||||||||
| Principal amount of debt (excluding original issue discount) | $ | 9,540,000 | $ | 1,696,000 | $ | 318,000 | $ | 100,000 | $ | 11,654,000 | ||||||||||
| Add conversion of debt from convertible debentures | 3,551,528 | - | - | - | 3,551,528 | |||||||||||||||
| Add: accrued interest | 1,711,273 | 164,083 | 29,754 | 8,933 | 1,914,043 | |||||||||||||||
| Principal amount of debt including accrued interest | 14,802,801 | 1,860,083 | 347,754 | 108,933 | 17,119,571 | |||||||||||||||
| Debt discount: | ||||||||||||||||||||
| Allocated embedded derivative liabilities | (4,760,000 | ) | (822,000 | ) | (188,000 | ) | (64,000 | ) | (5,834,000 | ) | ||||||||||
| Liquidated Damages recognized upon issuance | (706,944 | ) | (67,200 | ) | (12,600 | ) | (4,200 | ) | (790,944 | ) | ||||||||||
| Issuance costs | (590,000 | ) | (106,000 | ) | (18,000 | ) | - | (714,000 | ) | |||||||||||
| Subtotal debt discount | (6,056,944 | ) | (995,200 | ) | (218,600 | ) | (68,200 | ) | (7,338,944 | ) | ||||||||||
| Less amortization of debt discount | 2,927,248 | 414,465 | 89,422 | 27,200 | 3,458,335 | |||||||||||||||
| Unamortized debt discount | (3,129,696 | ) | (580,735 | ) | (129,178 | ) | (41,000 | ) | (3,880,609 | ) | ||||||||||
| Carrying value at December 31, 2019 | 11,673,105 | 1,279,348 | 218,576 | 67,933 | 13,238,962 | |||||||||||||||
| Less current portion | (534,993 | ) | - | (206,204 | ) | - | (741,197 | ) | ||||||||||||
| Carry value at December 31, 2019, net of current portion | $ | 11,138,112 | $ | 1,279,348 | $ | 12,372 | $ | 67,933 | $ | 12,497,765 | ||||||||||
For additional information for the years ended December 31, 2020 and 2019 with respect to interest expense related to the 12% Convertible Debentures is provided in Note 19.
| F-41 |
| 19. | Long-term Debt |
12% Senior Secured Note
On June 10, 2019, the Company entered into a note purchase agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, pursuant to which the Company issued to the investor a 12% senior secured note, due July 31, 2019 (the “12% Senior Secured Note”), in the aggregate principal amount of $20,000,000, which after taking into account a B. Riley FBR placement fee of $1,000,000 and legal fees and expenses of the investor of $135,000, resulted in the Company receiving net proceeds of $18,865,000, of which $16,500,000 was deposited into escrow to fund TheStreet Merger consideration and the balance of $2,365,000 was to be used by the Company for working capital and general corporate purposes.
The balance outstanding under the note purchase agreement was no longer outstanding as of June 14, 2019 (refer to 12% Amended Senior Secured Notes below).
12% Amended Senior Secured Notes
On June 14, 2019, the Company entered into an amended and restated note purchase agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, which amended and restated the note purchase agreement and the 12% Senior Secured Note issued by the Company thereunder. All borrowings under the amended and restated note purchase agreement are collateralized by substantially all assets of the Company. Pursuant to the amended and restated note purchase agreement, the Company issued an amended and restated 12% senior secured note, due June 14, 2022, in the aggregate principal amount of $68,000,000, which amended, restated, and superseded that $20,000,000 12% Senior Secured Note issued by the Company to the investor (the “12% Amended Senior Secured Note(s)”). The Company received additional gross proceeds of $48,000,000, which after taking into account a B. Riley FBR placement of $2,400,000, the Company received net proceeds of $45,600,000, of which $45,000,000 was paid to ABG against future Royalties in connection with the Sports Illustrated Licensing Agreement with ABG, and the balance of $600,000 was used by the Company for working capital and general corporate purposes. In addition, the Company paid B. Riley FBR, in cash, a success fee of $3,400,000 and legal fees of the investor of $50,000.
On August 27, 2019, the Company entered into a first amendment to amended note purchase agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, which amended the 12% Amended Senior Secured Note. Pursuant to this first amendment, the Company received gross proceeds of $3,000,000, which after taking into account a B. Riley FBR placement fee of $150,000, the Company received net proceeds of approximately $2,850,000, which was used by the Company for working capital and general corporate purposes. In addition, the Company paid B. Riley FBR in cash legal fees of the investor of $17,382.
On February 27, 2020, the Company entered into a second amendment to the amended and restated note purchase agreement, which further amended the amended and restated note purchase agreements dated as of June 14, 2019. Pursuant to the second amendment to the amended and restated note purchase agreement, the Company replaced its previous $3,500,000 working capital facility with Sallyport with a new $15,000,000 working capital facility with FastPay; and (ii) BRF Finance issued a letter of credit in the amount of approximately $3,000,000 to the Company’s landlord for the property lease located at 225 Liberty Street, 27th Floor, New York, New York 10281.
The balance outstanding under the note purchase agreement was no longer outstanding as of March 24, 2020 (refer to 12% Second Amended Senior Secured Notes below).
| F-42 |
12% Second Amended Senior Secured Notes
On March 24, 2020, the Company entered into a second amended and restated note purchase agreement, which further amended and restated the 12% Amended Senior Secured Notes (collectively, with all previous amendments and restatements, the “12% Second Amended Senior Secured Notes”). Pursuant to the 12% Second Amended Senior Secured Notes, interest on amounts outstanding under the existing 12% Amended Senior Secured Notes with respect to (i) interest that was payable on March 31, 2020 and June 30, 2020, and (ii) at the Company’s option, with the consent of requisite purchasers, interest that was payable on September 30, 2020 and December 31, 2020, in lieu of the payment in cash of all or any portion of the interest due on such dates, was payable in-kind in arrears on the last day of such applicable fiscal quarter.
On October 23, 2020, the Company entered into an amendment to the 12% Second Amended Senior Secured Notes (“Amendment 1”), pursuant to which the maturity date of the 12% Second Amended Senior Secured Notes was changed to December 31, 2022, subject to certain acceleration conditions. Pursuant to Amendment 1, interest payable on the 12% Second Amended Senior Secured Notes on September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts originally could have been paid in shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, all such interest amounts can be paid in shares of the Company’s common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments.
Further details subsequent to the date of these consolidated financial statements are provided under the heading Long-Term Debt in Note 27.
Delayed Draw Term Note
On March 24, 2020, the Company entered into a 15% delayed draw term note (the “Term Note”) pursuant to the 12% Second Amended Senior Secured Notes, in the aggregate principal amount of $12,000,000.
On March 24, 2020, the Company drew down $6,913,865 under the Term Note, and after payment of commitment and funding fees paid to BRF Finance in the amount of $793,109, and other of its legal fees and expenses that were incurred, the Company received net proceeds of $6,000,000. The net proceeds were used for working capital and general corporate purposes. Additional borrowings under the Term Note requested by the Company may be made at the option of the purchasers, subject to certain conditions. Up to $8,000,000 in principal amount under the Term Note was originally due on March 31, 2021. Interest on amounts outstanding under the Term Note was payable in-kind in arrears on the last day of each fiscal quarter.
Pursuant to the terms of Amendment 1, the maturity date was changed from March 31, 2021 to March 31, 2022. Amendment 1 also provided that BRF Finance, as holder, could originally elect, in lieu of receipt of cash for payment of all or any portion of the interest due or cash payments up to a certain conversion portion (as further described in Amendment 1) of the Term Note, to receive shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, the holder may elect, in lieu of receipt of cash for such interest amounts, shares of the Company’s common stock Company’s common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments.
On October 23, 2020, $3,367,000, including principal and accrued interest of the Term Note, converted into shares of the Company’s Series K Preferred Stock (see Note 20).
Further details subsequent to the date of these consolidated financial statements are provided under the heading Long-Term Debt in Note 27.
| F-43 |
Paycheck Protection Program Loan
On April 6, 2020, the Company entered into a note agreement with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”) (the “PPP Loan”). The Company received total proceeds of $5,702,725 under the PPP Loan. In accordance with the requirements of the CARES Act, the Company used proceeds from the PPP Loan primarily for payroll costs. The PPP Loan was scheduled to mature on April 6, 2022, with a 0.98% interest rate and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The PPP Loan was fully forgiven on June 22, 2021 (further details are provided under the heading Long-Term Debt in Note 27).
The following table represents the components of long-term debt recognized during the years ended December 31, 2020 and 2019 and the carrying value as of December 31, 2020 and 2019:
| As of December 31, | ||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||
| 12%
Second Amended Senior Secured Notes Components | Delayed Draw Term Note Components | Paycheck Protection Program Loan Components | Total
Long-term Debt Components | 12%
Second Amended Senior Secured Notes Components | ||||||||||||||||
| Principal amount of debt: | ||||||||||||||||||||
| Principal amount of debt received on June 10, 2019 | $ | 20,000,000 | $ | - | $ | - | $ | 20,000,000 | $ | 20,000,000 | ||||||||||
| Principal amount of debt received on June 14, 2019 | 48,000,000 | - | - | 48,000,000 | 48,000,000 | |||||||||||||||
| Principal amount of debt received on August 27, 2019 | 3,000,000 | - | - | 3,000,000 | 3,000,000 | |||||||||||||||
| Principal amount of debt received on March 26, 2020 | - | 6,913,865 | - | 6,913,865 | - | |||||||||||||||
| Principal amount of debt received on April 6, 2020 | - | - | 5,702,725 | 5,702,725 | - | |||||||||||||||
| Subtotal principal amount of debt | 71,000,000 | 6,913,865 | 5,702,725 | 83,616,590 | 71,000,000 | |||||||||||||||
| Add accrued interest | 7,457,388 | 675,958 | - | 8,133,346 | 1,082,642 | |||||||||||||||
| Less principal payment paid in Series J Preferred Stock (net of interest of $146,067) | (4,853,933 | ) | - | - | (4,853,933 | ) | (4,853,933 | ) | ||||||||||||
| Less principal payment paid in Series K Preferred Stock (net of interest of $71,495) | - | (3,295,505 | ) | - | (3,295,505 | ) | - | |||||||||||||
| Less principal payments paid in cash | (17,307,364 | ) | - | - | (17,307,364 | ) | (17,307,364 | ) | ||||||||||||
| Principal amount of debt outstanding including accrued interest | 56,296,091 | 4,294,318 | 5,702,725 | 66,293,134 | 49,921,345 | |||||||||||||||
| Debt discount: | ||||||||||||||||||||
| Placement fee to B. Riley FBR | (3,550,000 | ) | (691,387 | ) | - | (4,241,387 | ) | (3,550,000 | ) | |||||||||||
| Commitment fee (2% of unused commitment) | - | (101,723 | ) | - | (101,723 | ) | - | |||||||||||||
| Success based fee to B. Riley FBR | (3,400,000 | ) | - | - | (3,400,000 | ) | (3,400,000 | ) | ||||||||||||
| Legal and other costs | (202,382 | ) | (120,755 | ) | - | (323,137 | ) | (202,382 | ) | |||||||||||
| Subtotal debt discount | (7,152,382 | ) | (913,865 | ) | - | (8,066,247 | ) | (7,152,382 | ) | |||||||||||
| Less amortization of debt discount | 3,412,692 | 554,693 | - | 3,967,385 | 1,240,782 | |||||||||||||||
| Unamortized debt discount | (3,739,690 | ) | (359,172 | ) | - | (4,098,862 | ) | (5,911,600 | ) | |||||||||||
| Carrying value at end of year | $ | 52,556,401 | $ | 3,935,146 | $ | 5,702,725 | $ | 62,194,272 | $ | 44,009,745 | ||||||||||
Information for the years ended December 31, 2020 and 2019 with respect to interest expense related to long-term debt is provided below under the heading Interest Expense.
| F-44 |
Interest Expense
The following table represents interest expense:
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Amortization of debt discounts: | ||||||||
| 12% Convertible Debentures | $ | 3,880,609 | $ | 3,304,893 | ||||
| 12% Second Amended Senior Secured Notes | 2,171,910 | 1,240,782 | ||||||
| Term Note | 554,693 | - | ||||||
| Total amortization of debt discount | 6,607,212 | 4,545,675 | ||||||
| Accrued and noncash converted interest: | ||||||||
| 12% Convertible Debentures | 2,116,281 | 1,831,130 | ||||||
| 12% Second Amended Senior Secured Notes | 6,374,746 | 1,228,709 | ||||||
| Term Note | 747,453 | - | ||||||
| Promissory Note | 5,844 | 5,794 | ||||||
| Total accrued and noncash converted interest | 9,244,324 | 3,065,633 | ||||||
| Cash paid interest: | ||||||||
| 12% Second Amended Senior Secured Notes | - | 2,351,904 | ||||||
| Promissory Note | - | 983 | ||||||
| Other | 645,681 | 499,375 | ||||||
| Total cash paid interest expense | 645,681 | 2,852,262 | ||||||
| Total interest expense | $ | 16,497,217 | $ | 10,463,570 | ||||
| 20. | Preferred Stock |
The Company has the authority to issue 1,000,000 shares of preferred stock, $0.01 par value per share, consisting of authorized and/or outstanding shares as of December 31, 2020 as follows:
| ● | 2,000 authorized shares designated as “Series F Convertible Preferred Stock,” none of which are outstanding; | |
| ● | 1,800 authorized shares designated as “Series G Convertible Preferred Stock” (as further described below), of which 168.496 shares are outstanding; | |
| ● | 23,000 authorized shares designated as “Series H Convertible Preferred Stock” (as further described below), of which 19,597 shares are outstanding; | |
| ● | 25,800 authorized shares designated as “Series I Convertible Preferred Stock” on June 27, 2019, none of which are outstanding (as further described below); | |
| ● | 35,000 authorized shares designated as “Series J Convertible Preferred Stock” on October 4, 2019, none of which are outstanding (as further described below); and | |
| ● | 20,000 authorized shares designated as “Series K Convertible Preferred Stock” on October 22, 2020, none of which are outstanding (as further described below) |
Series G Preferred Stock
On May 30, 2000, the Company sold 1,800 shares of its Series G Convertible Preferred Stock (the “Series G Preferred Stock”), of which 1,631.504 were converted prior to November 2001 and 168.496 shares continue to be outstanding, at a stated value of $1,000 per share, convertible into 188,791 shares of the Company’s common stock. The Series G Preferred Stock is convertible into shares of common stock, at the option of the holder, subject to certain limitations. The Company may require holders to convert all (but not less than all) of the Series G Preferred Stock or buy out all outstanding shares of Series G Preferred Stock at the liquidation value of $168,496. Holders of Series G Preferred Stock are not entitled to dividends and have no voting rights, unless required by law or with respect to certain matters relating to the Series G Preferred Stock.
| F-45 |
Upon a change in control, sale of or similar transaction, as defined in the Certificate of Designation for the Series G Preferred Stock, the holder of the Series G Preferred Stock has the option to deem such transaction as a liquidation and may redeem their 168.496 shares at the liquidation value of $1,000 per share, or an aggregate amount of $168,496. The sale of all the assets of the Company on June 28, 2007 triggered the redemption option. As such redemption was not in the control of the Company, the Series G Preferred Stock has been accounted for as if it is redeemable preferred stock and is classified on the consolidated balance sheets as a mezzanine obligation between liabilities and stockholders’ equity.
Series H Preferred Stock
On August 10, 2018 (the “Closing Date”), the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which the Company issued an aggregate of 19,400 shares of Series H Convertible Preferred Stock (the “Series H Preferred Stock”) at a stated value of $1,000, initially convertible into 58,787,879 shares of the Company’s common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of $19,399,250 (net proceeds of $18,045,496 after taking into consideration issuance costs).
Between August 14, 2020 and August 20, 2020, the Company entered into additional securities purchase agreements for the sale of Series H Preferred Stock with accredited investors, pursuant to which the Company issued 108 shares (after it rescinded the issuance of 2,145 shares that were deemed null and void and repaid to certain holders on October 28, 2020), at a stated value of $1,000 per share, initially convertible into 327,273 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of $130,896 (net proceeds of $113,000 after taking into consideration issuance costs), which was used for working capital and general corporate purposes.
On October 31, 2020, the Company issued 389 shares of Series H Preferred Stock to James Heckman at the stated value of $1,000, convertible into 1,178,788 shares of the Company’s common stock, at the option of the holder subject to certain limitations at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share. The shares of Series H Preferred Stock were issued in connection with the cancellation of promissory notes payable to Mr. Heckman in the aggregate outstanding principal amount of $389,000.
The number of shares issuable upon conversion of the Series H Preferred Stock will be adjusted in the event of stock splits, stock dividends, combinations of shares and similar transactions. Each Series H Preferred Stock votes on an as-if-converted to common stock basis, subject to beneficial ownership blocker provisions and other certain conditions. In addition, if at any time the Company grants, issues or sells any common stock equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of common stock (the “Purchase Rights”), then a holder of the Series H Preferred Stock will be entitled to acquire the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of common stock acquirable upon complete conversion of such holder’s Series H Preferred Stock immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, subject to certain conditions, adjustments, and limitations. All the shares of Series H Preferred Stock automatically convert into shares of the Company’s common stock on the fifth anniversary of the Closing Date at the conversion price of $0.33 per share.
The shares of Series H Preferred Stock were subject to limitations on conversion into shares of the Company’s common stock until the date that increased the number of authorized shares of its common stock to at least a number permitting all the Series H Preferred Stock to be converted in full, which was filed on December 18, 2020, therefore this limitation was removed (as further described in Note 21).
| F-46 |
Pursuant to the registration rights agreement entered into on August 10, 2018, in connection with the securities purchase agreements, the Company agreed to register the shares issuable upon conversion of the Series H Preferred Stock for resale by the holders. The Company committed to file the registration statement by no later than 75 days after the closing date and to cause the registration statement to become effective, in general, by no later than 120 days after the closing date (or, in the event of a full review by the staff of the SEC, 150 days following the closing date). The registration rights agreement provides for a cash payment equal to 1.0% per month of the amount invested as partial liquidated damages, on each monthly anniversary, payable within 7 days of such event, and upon the occurrence of certain events up to a maximum amount of 6.0% of the aggregate amount invested, subject to interest at 12.0% per annum, accruing daily, until paid in full. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
The securities purchase agreements entered into on August 10, 2018, included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement after 6 months of the closing date, then the Company will be obligated to pay to each holder a cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. The securities purchase agreements provide for Public Information Failure Damages (further details are provided in Note 15).
The following table represents the components of the Series H Preferred Stock for the year ended December 31, 2020 and as of December 31, 2019:
| Shares | Series H Preferred Stock Components | |||||||
| Series H Preferred Stock at December 31, 2019 | 19,400 | $ | 18,045,496 | |||||
| Issuance of Series H Preferred Stock on August 19, 2020: | ||||||||
| Issuance of Series H Preferred Stock | 108 | 130,896 | ||||||
| Less issuance costs netted from the proceeds | (17,896 | ) | ||||||
| Net proceeds received upon issuance of Series H Preferred Stock | 113,000 | |||||||
| Conversion of Series H Preferred Stock into common stock on September 21, 2020 | (300 | ) | (300,000 | ) | ||||
| Issuance of Series H Preferred Stock upon conversion of promissory note on November 13, 2020 | 389 | 389,000 | ||||||
| Net issuance of Series H Preferred Stock | 197 | 202,000 | ||||||
| Series H Preferred Stock at December 31, 2020 | 19,597 | $ | 18,247,496 | |||||
| Beneficial conversion feature recognized during the year ended December 31, 2020 (as described below) upon issuance of Series H Preferred Stock | $ | 502,000 | ||||||
During the year ended December 31, 2020, in connection with the issuance of 108 shares (issued on August 19, 2020) and 389 shares (issued on October 31, 2020) of Series H Preferred Stock, the Company recorded a beneficial conversion feature in the amount of $113,000 and $389,000 (totaling $502,000), respectively, for the underlying common shares since the nondetachable conversion feature was in-the-money (the conversion price of $0.33 was lower than the Company’s common stock trading price of $0.86 and $0.77 at the issuance date of August 19, 2020 and October 31, 2020, respectively). The beneficial conversion feature was recognized as a deemed dividend with an offset to additional paid-in capital.
Series I Preferred Stock
On June 28, 2019, the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which the Company issued an aggregate of 23,100 shares of Series I Convertible Preferred Stock (the “Series I Preferred Stock”) at a stated value of $1,000, initially convertible into 46,200,000 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.50 per share, for aggregate gross proceeds of $23,100,000. Each Series I Preferred Stock votes on an as-if-converted to common stock basis, subject to certain conditions.
| F-47 |
In consideration for its services as placement agent, the Company paid B. Riley FBR a cash fee of $1,386,000 plus $73,858 in reimbursement of legal fees and other transaction costs. The Company used approximately $18.3 million of the net proceeds from the financing to partially repay the amended and restated 12% Amended Senior Secured Note dated June 14, 2019, and to pay deferred fees of approximately $3.4 million related to that borrowing facility.
Pursuant to the registration rights agreements entered into in connection with the securities purchase agreements on June 28, 2019, the Company agreed to register the shares issuable upon conversion of the Series I Preferred Stock for resale by the investors. The Company committed to file the registration statement no later than the 30th calendar day following the date the Company files (i) its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, (ii) all its required quarterly reports on Form 10-Q since the quarter ended September 30, 2018 through September 30, 2019, and (iii) current Form 8-K in connection with the acquisitions of TheStreet and its license with ABG, with the SEC, but in no event later than December 1, 2019. The Company committed to cause the registration statement to become effective by no later than 90 days after December 1, 2019, subject to certain conditions and upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
The securities purchase agreements included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement after 6 months of the closing date, then the Company will be obligated to pay to each holder a cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. The securities purchase agreements provide for Public Information Failure Damages (further details are provided in Note 15).
The Company recognized a portion of the Liquidated Damages pursuant to the registration rights and securities purchase agreements in connection with the Series I Preferred Stock at the time of issuance as it was deemed probable the obligations would not be satisfied when the financing was completed (further details are presented in the table below).
The following table represents the components of the Series I Preferred Stock for the years ended December 31, 2020 and 2019:
| Shares | Series I Preferred Stock Components | |||||||
| Issuance of Series I Preferred Stock on June 28, 2019 | 23,100 | $ | 23,100,000 | |||||
| Less issuance costs: | ||||||||
| Cash paid to B. Riley FBR as placement fee | (1,386,000 | ) | ||||||
| Legal fees and other costs | (73,858 | ) | ||||||
| Total issuance costs | (1,459,858 | ) | ||||||
| Less Liquidated Damages recognized upon issuance | (1,940,400 | ) | ||||||
| Total issuance costs and Liquidated Damages | (3,400,258 | ) | ||||||
| Net issuance of Series I Preferred Stock at December 31, 2019 | 23,100 | 19,699,742 | ||||||
| Conversion of Series I Preferred Stock to common stock on December 18, 2020 | (23,100 | ) | (19,699,742 | ) | ||||
| Series I Preferred Stock at December 31, 2020 | - | $ | - | |||||
| Beneficial conversion feature recognized during the year ended December 31, 2020 (as described below) upon conversion of Series I Preferred Stock | $ | 5,082,000 | ||||||
All of the shares of Series I Preferred Stock converted automatically into shares of the Company’s common stock on December 18, 2020, as a result of the increase in the number of authorized shares of the Company’s common stock (as further described in Note 21). Upon conversion the Company recognized a beneficial conversion feature for the underlying common shares since the nondetachable conversion feature was in-the-money (the conversion price of $0.50 was lower than the Company’s common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend with an offset to additional paid-in capital.
| F-48 |
Series J Preferred Stock
On October 7, 2019, the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which the Company issued an aggregate of 20,000 shares of Series J Convertible Preferred Stock (the “Series J Preferred Stock”) at a stated value of $1,000, initially convertible into 28,571,428 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of $20,000,000.
In consideration for its services as placement agent, the Company paid B. Riley FBR a cash fee of $525,240 plus $43,043 in reimbursement of legal fees and other transaction costs. The Company used $5.0 million of the net proceeds from the financing to partially repay the amended and restated 12% Senior Secured Note dated June 14, 2019, and to use net proceeds of approximately $14.4 million for working capital and general corporate purposes.
Pursuant to the registration rights agreements entered into in connection with the securities purchase agreements on October 7, 2019, the Company agreed to register the shares issuable upon conversion of the Series J Preferred Stock for resale by the investors. The Company committed to file the registration statement no later than the 30th calendar day following the date the Company files (i) its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, (ii) all its required quarterly reports on Form 10-Q since the quarter ended September 30, 2018 through September 30, 2019, and (iii) current Form 8-K in connection with the acquisition of TheStreet, and other acquisitions during 2018, and its license with ABG, with the SEC, but in no event later than March 31, 2020. The Company committed to cause the registration statement to become effective by no later than 90 days after March 31, 2020, subject to certain conditions and upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
On September 4, 2020, the Company closed on securities purchase agreements with two accredited investors, pursuant to which the Company issued an aggregate of 10,500 shares of Series J Preferred Stock at a stated value of $1,000 per share, initially convertible into 15,000,000 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70, for aggregate gross proceeds of $6,000,000, which was used for working capital and general corporate purposes.
Pursuant to a registration rights agreement entered into in connection with the securities purchase agreements on September 4, 2020, the Company agreed to register the shares issuable upon conversion of the Series J Preferred Stock for resale by the investors. The Company committed to file the registration statement by no later than the 30th calendar day following the date the Company files its (a) Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and December 31, 2019, (b) all its required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2020, and (c) any Form 8-K Reports that the Company is required to file with the SEC; but in no event later than April 30, 2021 (the “Filing Date”). The Company also committed to cause the registration statement to become effective by no later than 60 days after the Filing Date (or, in the event of a full review by the staff of the SEC, 120 days following the Filing Date) and upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
The number of shares issuable upon conversion of the Series J Preferred Stock will be adjusted in the event of stock splits, stock dividends, combinations of shares and similar transactions. Each share of Series J Convertible Preferred Stock votes on an as-if-converted to common stock basis, subject to certain conditions.
The securities purchase agreements included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement after 6 months of the closing date, then the Company will be obligated to pay to each holder a cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. The securities purchase agreements provide for Public Information Failure Damages (further details are provided in Note 15).
| F-49 |
The Company recognized a portion of the Liquidated Damages pursuant to the registration rights and securities purchase agreements in connection with the Series J Preferred Stock at the time of issuance as it was deemed probable the obligations would not be satisfied when the financing was completed (further details are presented in the table below).
The following table represents the components of the Series J Preferred Stock for the years ended December 31, 2020 and 2019:
| Shares | Series J Preferred Stock Components | |||||||
| Issuance of Series J Preferred Stock on October 7, 2019 | 20,000 | $ | 20,000,000 | |||||
| Less shares issued for payment of 12% Amended Senior Secured Notes | (5,000 | ) | (5,000,000 | ) | ||||
| Net issuance of Series J Preferred Stock | 15,000 | $ | 15,000,000 | |||||
| Issuance of Series J Preferred Stock | 20,000 | $ | 20,000,000 | |||||
| Less issuance costs: | ||||||||
| Cash paid to B. Riley FBR as placement fee | (525,240 | ) | ||||||
| Legal fees and other costs | (54,764 | ) | ||||||
| Total issuance costs | (580,004 | ) | ||||||
| Less Liquidated Damages recognized upon issuance | (1,680,000 | ) | ||||||
| Total issuance costs and Liquidated Damages | (2,260,004 | ) | ||||||
| Net issuance of Series J Preferred Stock at December 31, 2019 | 17,739,996 | |||||||
| Issuance of Series J Preferred Stock on September 4, 2020 | 10,500 | 6,000,000 | ||||||
| Net Issuance of Series J Preferred Stock prior to conversion on December 18, 2020 | 30,500 | 23,739,996 | ||||||
| Conversion of Series J Preferred Stock to common stock on December 18, 2020 (as further described below) | (30,500 | ) | (23,739,996 | ) | ||||
| Series I Preferred Stock at December 31, 2020 | - | $ | - | |||||
| Beneficial conversion feature recognized during the year ended December 31, 2020 (as described below) upon conversion of Series J Preferred Stock | $ | 586,545 | ||||||
All of the shares of Series J Preferred Stock converted automatically into shares of the Company’s common stock on December 18, 2020, as a result of the increase in the number of authorized shares of the Company’s common stock (as further described in Note 21). Upon conversion the Company recognized a beneficial conversion feature for the underlying common shares since the nondetachable conversion feature was in-the-money (the effective conversion price of $0.40 for the issuance of Series J Preferred Stock on September 4, 2020 (these shares were issued at a discount) was lower than the Company’s common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend with an offset to additional paid-in capital.
Series K Preferred Stock
Between October 23, 2020 and November 11, 2020, the Company closed on several securities purchase agreements with accredited investors, pursuant to which the Company issued an aggregate of 18,042 shares of Series K Convertible Preferred Stock” (the “Series K Preferred Stock”) at a stated value of $1,000, initially convertible into 45,105,000 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of $18,042,000. The number of shares issuable upon conversion of the Series K Preferred Stock will be adjusted in the event of stock splits, stock dividends, combinations of shares and similar transactions. Each Series K Preferred Stock votes on an as-if-converted to common stock basis, subject to certain conditions.
In consideration for its services as placement agent, the Company paid B. Riley FBR a cash fee of $560,500. The Company used approximately $3.4 million of the net proceeds from the financing to partially repay the Term Note and used approximately $2.6 million for payment on a prior investment, with the remainder of approximately $11.5 million for working capital and general corporate purposes.
| F-50 |
Pursuant to a registration rights agreement entered into in connection with the securities purchase agreements, the Company agreed to register the shares issuable upon conversion of the Series K Preferred Stock for resale by the investors. The Company committed to file the registration statement by no later than the 30th calendar day following the date the Company files its (a) Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and December 31, 2019, (b) all its required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2020, and (c) any Form 8-K Reports that the Company is required to file with the SEC; provided, however, if such 30th calendar day is on or after February 12, 2021, then such 30th calendar date shall be tolled until the 30th calendar day following the date that the Company files its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Filing Date”). The Company also committed to cause the registration statement to become effective by no later than 90 days after the Filing Date (or, in the event of a full review by the staff of the SEC, 120 days following the Filing Date) and upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested. The registration rights agreements provide for Registration Rights Damages (further details are provided in Note 15).
The securities purchase agreements included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement after 6 months of the closing date, then the Company will be obligated to pay to each holder a cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. The securities purchase agreements provide for Public Information Failure Damages (further details are provided in Note 15).
The following table represents the components of the Series K Preferred Stock for the year ended December 31, 2020:
| Shares | Series K Preferred Stock Components | |||||||
| Issuance of Series K Preferred Stock: | ||||||||
| Issuance of Series K Preferred Stock on October 23, 2020 | 6,750 | $ | 6,750,000 | |||||
| Issuance of Series K Preferred Stock on October 28, 2020 | 5,292 | 5,292,000 | ||||||
| Issuance of Series K Preferred Stock on November 11, 2020 | 6,000 | 6,000,000 | ||||||
| Subtotal issuance of Series K Preferred Stock | 18,042 | 18,042,000 | ||||||
| Less issuance costs: | ||||||||
| Cash paid to B. Riley FBR as placement fee | (440,500 | ) | ||||||
| Legal fees and other costs | (120,000 | ) | ||||||
| Total issuance costs | (560,500 | ) | ||||||
| Net issuance of Series K Preferred Stock prior to conversion on December 18, 2020 | 17,481,500 | |||||||
| Conversion of Series K Preferred Stock to common stock on December 18, 2020 | (18,042 | ) | (17,481,500 | ) | ||||
| Series K Preferred Stock at December 31, 2020 | - | $ | - | |||||
| Beneficial conversion feature recognized during the year ended December 31, 2020 (as described below) upon conversion of Series k Preferred Stock | $ | 9,472,050 | ||||||
All of the shares of Series K Preferred Stock converted automatically into shares of the Company’s common stock on December 18, 2020, as a result of the increase in the number of authorized shares of the Company’s common stock (as further described in Note 21). Upon conversion the Company recognized a beneficial conversion feature for the underlying common shares since the nondetachable conversion feature was in-the-money (the conversion price of $0.40 was lower than the Company’s common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend with an offset to additional paid-in capital.
| F-51 |
| 21. | Stockholders’ Equity |
Common Stock
The Company has the authority to issue 1,000,000,000 shares of common stock, $0.01 par value per share as the result of filing on December 18, 2020, a Certificate of Amendment with the Secretary of the State of Delaware to increase the number of authorized shares of its common stock from 100,000,000 shares to 1,000,000,000 shares.
Common Stock to be Issued
During the years ended December 31, 2020 and 2019, in connection with the merger of Say Media, the Company issued 2,857,357 shares and 1,188,880 shares, respectively, of its common stock out of total shares required to be issued of 5,067,167 as of January 1, 2019, and has remaining shares to be issued of 1,020,930 as of December 31, 2020.
In connection with a closing of a private placement on January 4, 2018, MDB, as the placement agent, was entitled to receive 60,000 shares of the Company’s common stock that have not been issued as of December 31, 2020. Further, the 60,000 shares of common stock to be issued were subject to Liquidated Damages (see Note 15).
Restricted Stock Awards
As of December 31, 2020 and 2019, a net of 12,312,417 restricted stock awards for shares of the Company’s common stock issued during 2016 remain outstanding and are fully vested. The awards contained a buy-back right that was waived by the Board on March 12, 2018, which resulted in a modification of the restricted stock awards upon the waiver. The shares vest over a three-year period starting on the beginning of the month of the issuance date, with one-third vesting in one year, and the balance monthly over the remaining two years. Because these shares require continued service to the Company, the estimated fair value of the shares is being recognized as compensation expense over the vesting period of the award.
In connection with the merger of HubPages, the Company issued a total of 2,399,997 shares of common stock to certain key personnel of HubPages who agreed to continue their employment, as restricted stock awards, subject to a repurchase right and vesting. The repurchase right, which expired in March 2019 unexercised, gave the Company the option to repurchase a certain number of shares at par value based on a performance condition as defined in the terms of the merger agreement. The shares were subject to vesting over twenty-four equal monthly installments beginning September 23, 2019, and ending September 23, 2021, with the estimated fair value of these shares was recognized as compensation expense over the vesting period of the award. The restricted stock awards provided for a true-up period that if the common stock was sold for less than $2.50 the holder would receive, subject to certain conditions, additional shares of common stock up to a maximum of the number of shares originally received (or 2,400,000 in aggregate to all holders) for the shares that re-sold for less than $2.50. The true-up provision was settled on May 31, 2019 (as further described in Note 22). The true-up period, in general, was 13 months after the consummation of the merger until 90 days following completion of vesting, or July 30, 2021. The restricted stock awards were fair valued upon issuance by an independent appraisal firm.
On January 1, 2019, the Company issued 833,333 shares of its common stock as restricted stock awards to certain members of the Board subject to continued service with the Company. The awards vest over a twelve-month period from the grant date and the estimated fair value of these shares is being recognized as compensation expense over the vesting period of the award (see Note 22).
On December 11, 2019, the Company modified the vesting provisions of 2,000,000 restricted stock awards, issued in connection with the Say Media merger, to remove certain repurchase rights, such that they will vest six equal installments at four-month intervals on the twelfth of each month, starting on December 12, 2019, with the final vesting date on August 12, 2021. Compensation expense is recognized over the vesting period of the awards.
| F-52 |
On January 1, 2020, the Company issued 562,500 shares of its common stock as restricted stock awards to certain members of the Board subject to continued service with the Company. The awards vest over a twelve-month period from the grant date and the estimated fair value of these shares is being recognized as compensation expense over the vesting period of the award (see Note 22).
Unless otherwise stated, the fair value of a restricted stock award is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date issued.
A summary of the restricted stock award activity during the years ended December 31, 2020 and 2019 is as follows:
| Number of Shares | Weighted Average Grant-Fair | |||||||||||
| Unvested | Vested | Value Date | ||||||||||
| Restricted stock awards outstanding at January 1, 2019 | 6,309,874 | 10,484,046 | $ | 0.50 | ||||||||
| Issued | 833,333 | - | 0.48 | |||||||||
| Vested | (3,926,542 | ) | 3,926,542 | |||||||||
| Forfeited | (825,000 | ) | (402,512 | ) | ||||||||
| Restricted stock awards outstanding at December 31, 2019 | 2,391,665 | 14,008,076 | 0.56 | |||||||||
| Issued | 562,500 | - | 0.18 | |||||||||
| Vested | (2,237,500 | ) | 2,237,500 | |||||||||
| Restricted stock awards subject to repurchase | - | (1,064,549 | ) | |||||||||
| Forfeited | (399,998 | ) | (746,813 | ) | ||||||||
| Restricted stock awards outstanding at December 31, 2020 | 316,667 | 14,434,214 | 0.42 | |||||||||
The Company recorded forfeited unvested restricted stock awards and/or forfeited vested restricted stock awards used for tax withholding of 1,146,811 (399,998 forfeited awards and 746,813 used for tax withholding) and 1,227,512 (825,000 forfeited awards and 402,512 used for tax withholding) during the years ended December 31, 2020 and 2019, respectively, on the consolidated statements of stockholders’ deficiency.
On December 31, 2020, the Company modified certain vested restricted stock awards where the Company agreed to repurchase the underlying common stock at a specified price and forfeited any unvested awards (as further described in Note 12)
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the restricted stock awards is provided under the heading Stock-Based Compensation in Note 22.
Common Stock Warrants
Warrants issued to purchase shares of the Company’s common stock to MDB, L2, Strome, and B. Riley (collectively the “Financing Warrants”) are described below.
MDB Warrants – On November 4, 2016, in conjunction with the recapitalization, the Company issued warrants to MDB (the “MDB Warrants”) to purchase shares of common stock with an exercise price of $0.20 per share, of which 327,490 warrants remain outstanding under this instrument as of December 31, 2020, subject to customary anti-dilution adjustments and exercisable for a period of five years.
On October 19, 2017, the Company issued warrants to MDB who acted as placement agent in connection with a private placement of its common stock, to purchase 119,565 shares of common stock. The warrants have an exercise price of $1.15 per share, subject to customary anti-dilution adjustments and exercisable for a period of five years.
| F-53 |
On January 4, 2018, the Company issued warrants to MDB which acted as placement agent in connection with a private placement of its common stock, to purchase 60,000 shares of common stock. The warrants have an exercise price of $2.50 per share, subject to customary anti-dilution adjustments, and may, in the event there is no effective registration statement covering the re-sale of the warrant shares, be exercised on a cashless basis, exercisable for a period of five years.
MDB Warrants exercisable for a total of 507,055 shares of the Company’s common stock were outstanding as of December 31, 2020 (as further detailed below).
L2 Warrants – Effective as of August 3, 2018, pursuant to a reset provision, the Company issued additional warrants to L2 Capital, LLC (“L2”) to purchase 640,405 shares of common stock at an exercise price of $0.50 per share (the “L2 Warrants”), which were carried on the consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise (see Note 16).
The L2 Warrants were exercisable for a period of five years, subject to customary anti-dilution adjustments, and may, in the event there was no effective registration statement covering the resale of the warrant shares, be exercised on a cashless basis in certain circumstances. On September 10, 2019, the L2 Warrants were fully exercised on a cashless basis, resulting in the issuance of 539,331 shares of the Company’s common stock.
Strome Warrants – On June 15, 2018, the Company modified the two securities purchase agreements dated January 4, 2018 and March 30, 2018 with Strome Mezzanine Fund LP (“Strome”). As consideration for such modification, the Company issued warrants to Strome (the “Strome Warrants”) to purchase 1,500,000 shares of common stock, exercisable at price of $0.50 per share (as amended), which are carried on the consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise (see Note 16). Strome was also granted observer rights on the Board.
The Strome Warrants are exercisable for a period of five years, subject to customary anti-dilution adjustments, and may, in the event there is no effective registration statement covering the resale of the warrant shares, be exercised on a cashless basis in certain circumstances.
B. Riley Warrants – On October 18, 2018, the Company issued warrants to B. Riley (the “B. Riley Warrants”) to purchase up to 875,000 shares of the Company’s common stock, with an exercise price of $1.00 per share, subject to customary anti-dilution adjustments, which are carried on the consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise (see Note 16).
The B. Riley Warrants are exercisable for a period of five years, subject to customary anti-dilution adjustments, and may, in the event, at any time after the six-month anniversary of the issuance of the warrants, if there is no effective registration statement covering the re-sale of the shares of common stock underlying the warrants, the warrants may be exercised on a cashless basis.
| F-54 |
A summary of the Financing Warrants activity during the years ended December 31, 2020 and 2019 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Weighted | Remaining | |||||||||||
| Number | Average | Contractual | ||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Financing Warrants outstanding at January 1, 2019 | 3,949,018 | $ | 0.64 | 4.81 | ||||||||
| Exercised | (1,066,963 | ) | ||||||||||
| Financing Warrants outstanding at December 31, 2019 | 2,882,055 | 0.80 | 3.95 | |||||||||
| Financing Warrants outstanding at December 31, 2020 | 2,882,055 | 0.60 | 2.94 | |||||||||
| Financing Warrants exercisable at December 31, 2020 | 2,882,055 | 0.60 | 2.94 | |||||||||
During 2019, the exercise of the 1,066,963 warrants in September 2019 on a cashless basis resulted in the issuance of 539,331 net shares of common stock when the common stock price was $0.80 per share.
The intrinsic value of exercisable but unexercised in-the-money Financing Warrants as of December 31, 2020 was approximately $280,996, based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.
The Financing Warrants outstanding and exercisable as of December 31, 2020 are summarized as follows:
| Outstanding | ||||||||||||||||||
| Exercise Price | Expiration Date | Classified as Derivative Liabilities (Shares) | Classified within Stockholders’ Equity (Shares) | Total Exercisable (Shares) | ||||||||||||||
| MDB Warrants | $ | 0.20 | November 4, 2021 | - | 327,490 | 327,490 | ||||||||||||
| Strome Warrants | 0.50 | June 15, 2023 | 1,500,000 | - | 1,500,000 | |||||||||||||
| B. Riley Warrants | 1.00 | October 18, 2025 | 875,000 | - | 875,000 | |||||||||||||
| MDB Warrants | 1.15 | October 19, 2022 | - | 119,565 | 119,565 | |||||||||||||
| MDB Warrants | 2.50 | October 19, 2022 | - | 60,000 | 60,000 | |||||||||||||
| Total outstanding and exercisable | 2,375,000 | 507,055 | 2,882,055 | |||||||||||||||
AllHipHop Warrants – On October 26, 2020, the Company exchanged 150,000 of Publisher Partner Warrants (as further described under the heading Publisher Partner Warrants) granted to AllHipHop, LLC (“AllHipHop”) for shares of the Company’s common stock that were originally granted on December 20, 2017 with an exercise price of $2.08, for an aggregate of 125,000 new warrants for shares of the Company’s common stock with an exercise price of $0.65 (the “AllHipHop Warrants”) for the surrender and termination of the original warrants granted (the “Exchange”) (further details are provided in Note 22).
The AllHipHop Warrants are exercisable for a period of five years, subject to customary anti-dilution adjustments, and may be exercised on a cashless basis.
Publisher Partner Warrants – On December 19, 2016, the Board approved up to 5,000,000 stock warrants to issue shares of the Company’s common stock to provide equity incentive to its Publisher Partners (the “Publisher Partner Warrants”) to motivate and reward them for their services to the Company and to align the interests of the Publisher Partners with those of stockholders of the Company. On August 23, 2018, the Board approved a reduction of the number of warrant reserve shares from 5,000,000 to 2,000,000. The issuance of the Publisher Partner Warrants is administered by management and approved by the Board.
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the Publisher Partner Warrants is provided under the heading Stock-Based Compensation in Note 22.
| F-55 |
ABG Warrants – On June 14, 2019, the Company issued 21,989,844 warrants to acquire the Company’s common stock to ABG in connection with the Sports Illustrated Licensing Agreement, expiring in ten years. Half the warrants have an exercise price of $0.42 per share (the “Forty-Two Cents Warrants”). The other half of the warrants have an exercise price of $0.84 per share (the “Eighty-Four Cents Warrants”). The warrants provide for the following: (1) 40% of the Forty-Two Cents Warrants and 40% of the Eighty-Four Cents Warrants vest in equal monthly increments over a period of two years beginning on the one year anniversary of the date of issuance of the warrants (any unvested portion of such warrants to be forfeited by ABG upon certain terminations by the Company of the Sports Illustrated Licensing Agreement); (2) 60% of the Forty-Two Cents Warrants and 60% of the Eighty-Four Cents Warrants vest based on the achievement of certain performance goals for the licensed brands in calendar years 2020, 2021, 2022, or 2023; (3) under certain circumstances the Company may require ABG to exercise all (and not less than all) of the warrants, in which case all of the warrants will be vested; (4) all of the warrants automatically vest upon certain terminations of the Licensing Agreement by ABG or upon a change of control of the Company; and (5) ABG has the right to participate, on a pro-rata basis (including vested and unvested warrants, exercised or unexercised), in any future equity issuance of the Company (subject to customary exceptions).
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the ABG Warrants is provided under the heading Stock-Based Compensation in Note 22.
| 22. | Stock–Based Compensation |
Common Stock Awards
2016 Plan – On December 19, 2016, the Board adopted the 2016 Stock Incentive Plan (the “2016 Plan”). The purpose of the 2016 Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company, and to reward those individuals who contribute to the Company’s achievement of its economic objectives. The 2016 Plan allows the Company to grant statutory and non-statutory common stock options, and restricted stock awards (collectively the “common stock awards”) to acquire shares of the Company’s common stock to the Company’s employees, directors and consultants. Shares subject to an award that lapse, expire, are forfeited or for any reason are terminated unexercised or unvested will automatically again become available for issuance under the 2016 Plan. Stock awards issued under the 2016 Plan may have a term of up to ten years and may have variable vesting provisions consisting of time-based and performance-based.
On March 28, 2018, the Board approved an increase in the number of shares of the Company’s common stock reserved for grant pursuant to the 2016 Plan from 3,000,000 shares to 5,000,000 shares. On August 23, 2018, the Board increased the authorized number of shares of common stock under the 2016 Plan from 5,000,000 shares to 10,000,000 shares. The Company’s stockholders approved the increase in the number of shares authorized under the 2016 Plan on April 3, 2020. The issuance of common stock awards under the 2016 Plan is administered by the Company and approved by the Board.
The estimated fair value of the common stock awards is recognized as compensation expense over the vesting period of the award.
The fair value of common stock awards granted during the year ended December 31, 2020 were calculated using the Black-Scholes option pricing model under the Probability Weighted Scenarios utilizing the following assumptions:
| Up-list | No Up-list | |||||||
| Risk-free interest rate | 0.45 | % | 0.45 | % | ||||
| Expected dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 71.00 | % | 132.00 | % | ||||
| Expected life | 6.0 years | 6.0 years | ||||||
| F-56 |
A summary of the common stock award activity during the years ended December 31, 2020 and 2019 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Weighted | Remaining | |||||||||||
| Number | Average | Contractual | ||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Common stock awards outstanding at January 1, 2019 | 9,405,541 | $ | 0.61 | 9.30 | ||||||||
| Exercised | (25,000 | ) | 0.17 | |||||||||
| Forfeited | (1,197,776 | ) | 0.73 | |||||||||
| Expired | (118,204 | ) | 1.09 | |||||||||
| Common stock awards outstanding at December 31, 2019 | 8,064,561 | 0.62 | 8.34 | |||||||||
| Granted | 234,000 | 0.90 | ||||||||||
| Exercised | (6,944 | ) | 0.56 | |||||||||
| Forfeited | (601,179 | ) | 1.09 | |||||||||
| Expired | (788,101 | ) | 0.53 | |||||||||
| Common stock awards outstanding at December 31, 2020 | 6,902,337 | 0.86 | 7.50 | |||||||||
| Common stock awards exercisable at December 31, 2020 | 6,027,418 | 0.90 | 7.47 | |||||||||
| Common stock awards not vested at December 31, 2020 | 874,919 | |||||||||||
| Common stock awards available for future grants at December 31, 2020 | 3,097,663 | |||||||||||
The aggregate grant date fair value of common stock awards granted during the years ended December 31, 2020 was $117,000.
The intrinsic value of exercisable but unexercised in-the-money common stock awards as of December 31, 2020 was approximately $185,413 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.
The exercise prices under the 2016 Plan for the common stock awards outstanding and exercisable are as follows as of December 31, 2020:
| Exercise | Outstanding | Exercisable | ||||||||
| Price | (Shares) | (Shares) | ||||||||
| Under $1.00 | 4,825,750 | 3,982,816 | ||||||||
| $ | 1.01 to $1.25 | 780,751 | 779,843 | |||||||
| $ | 1.51 to $1.75 | 250,000 | 229,479 | |||||||
| $ | 1.76 to $2.00 | 924,169 | 913,613 | |||||||
| $ | 2.01 to $2.25 | 121,667 | 121,667 | |||||||
| 6,902,337 | 6,027,418 | |||||||||
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the common stock awards is provided under the heading Stock-Based Compensation.
| F-57 |
Common Equity Awards
2019 Plan – On April 4, 2019, the Board adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The purpose of the 2019 Plan is to retain the services of our directors, employees, and consultants and align the interests of these individuals with the interests of our stockholders through awards of stock options, restricted stock awards, unrestricted stock awards, and stock appreciation rights (collectively the “common equity awards”). Certain common equity awards require the achievement of certain price targets of the Company’s common stock. Shares subject to a common equity award that lapse, expire, are forfeited or for any reason are terminated unexercised or unvested will automatically again become available for issuance under the 2019 Plan. Common stock options issued under the 2019 Plan may have a term of up to ten years and may have variable vesting provisions consisting of time-based, performance-based, or market-based.
The Company’s stockholders approved the 2019 Plan and the maximum number of shares authorized of 85,000,000 under the 2019 Plan on April 3, 2020 (further details subsequent to the issuance date of these consolidated financial statements are provided under the heading 2019 Equity Incentive Plan in Note 27). The issuance of common equity awards under the 2019 Plan is administered by the Company and approved by the Board. Prior to December 18, 2020, the Company did not have sufficient authorized but unissued shares of common stock to allow for the exercise of these common equity awards granted; accordingly, any common equity awards granted were considered unfunded and were not exercisable until sufficient common shares were authorized (further details are provided in Note 21).
The estimated fair value of the common equity awards is recognized as compensation expense over the vesting period of the award.
The fair value of common equity awards granted during the years ended December 31, 2020 and 2019 were calculated using the Black-Scholes option pricing model for the time-based and performance-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:
| December 31, 2020 | December 31, 2019 | |||||||||||||||
| Up-list | No Up-list | Up-list | No Up-list | |||||||||||||
| Expected life | 0.20% - 0.79 | % | 0.20% - 0.79 | % | 1.51% - 2.59 | % | 1.51% - 2.59 | % | ||||||||
| Risk-free interest rate | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
| Volatility factor | 61.00% - 91.00 | % | 61.00% - 142.00 | % | 69.00% - 95.00 | % | 119.00% - 149.00 | % | ||||||||
| Dividend rate | 3.0 – 6.7 years | 3.0 – 6.7 years | 3.0 – 6.0 years | 3.0 – 6.0 years | ||||||||||||
The fair value of common equity awards granted during the year ended December 31, 2019 were calculated using the Monte Carlo model for the market-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:
| Up-list | No Up-list | |||||||
| Expected life | 2.20% - 2.70 | % | 2.16% - 2.71 | % | ||||
| Risk-free interest rate | 0.00 | % | 0.00 | % | ||||
| Volatility factor | 140.00% - 146.00 | % | 110.00 | % | ||||
| Dividend rate | 10.0 years | 10.0 years | ||||||
| F-58 |
A summary of the common equity award activity during the years ended December 31, 2020 and 2019 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Weighted | Remaining | |||||||||||
| Number | Average | Contractual | ||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Common equity awards outstanding at January 1, 2019 | - | $ | - | - | ||||||||
| Granted | 68,180,863 | 0.53 | ||||||||||
| Forfeited | (3,167,218 | ) | 0.53 | |||||||||
| Common equity awards outstanding at December 31, 2019 | 65,013,645 | 0.53 | 9.43 | |||||||||
| Granted | 25,393,768 | 0.71 | ||||||||||
| Forfeited | (8,342,377 | ) | 0.61 | |||||||||
| Expired | (2,722 | ) | 0.56 | |||||||||
| Common equity awards vested at December 31, 2020 | 82,062,314 | 0.58 | 8.65 | |||||||||
| Common equity awards exercisable at December 31, 2020 | 13,608,686 | 0.54 | 8.49 | |||||||||
| Common equity awards not vested at December 31, 2020 | 68,453,628 | |||||||||||
| Common equity awards available for future grants at December 31, 2020 | 2,937,686 | |||||||||||
The aggregate grant date fair value for the common equity awards granted during the years ended December 31, 2020 and 2019 was $11,180,642 and $30,864,185, respectively.
The intrinsic value of exercisable but unexercised in-the-money common equity awards as of December 31, 2020 was approximately $1,416,000 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.
The exercise prices under the 2019 Plan for the common equity awards outstanding and exercisable are as follows as of December 31, 2020:
| Exercise | Outstanding | Exercisable | ||||||
| Price | (Shares) | (Shares) | ||||||
| No exercise price | 250,000 | 250,000 | ||||||
| Under $1.00 | 81,812,314 | 13,358,686 | ||||||
| 82,062,314 | 13,608,686 | |||||||
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the common equity awards is provided under the heading Stock-Based Compensation.
| F-59 |
Outside Options
The Company granted stock options outside the 2016 Plan and 2019 Plan during the year ended December 31, 2020 to certain officers, directors and employees of the Company as approved by the Board and administered by the Company (the “outside options”). The stock options were to acquire shares of the Company’s common stock and were subject to: (1) time-based vesting; (2) certain performance-based targets; and (3) certain performance achievements. Options to purchase common stock issued pursuant to the Outside Plan may have a term of up to ten years. The issuance of outside options is administered by the Company and approved by the Board. Prior to December 18, 2020, the Company did not have sufficient authorized but unissued shares of common stock to allow for the exercise of these outside options granted; accordingly, any common stock options granted were considered unfunded and were not exercisable until sufficient common shares were authorized (further details are provided in Note 21).
The fair value for the outside options granted during the year ended December 31, 2019 were calculated using the Black-Scholes option pricing model for the time-based and performance-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:
| Up-list | No Up-list | |||||||
| Risk-free interest rate | 2.49% –2.57 | % | 2.49% – 2.57 | % | ||||
| Expected dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 74.00% – 95.00 | % | 122.00% – 142.00 | % | ||||
| Expected life | 3.0 – 5.8 years | 3.0 – 5.8 years | ||||||
A summary of outside option activity during the years ended December 31, 2020 and 2019 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Weighted | Remaining | |||||||||||
| Number | Average | Contractual | ||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Outside options outstanding at January 1, 2019 | 2,414,000 | $ | 0.36 | 9.94 | ||||||||
| Granted | 1,500,000 | 0.57 | ||||||||||
| Exercised | (2,000 | ) | 0.35 | |||||||||
| Forfeited | (180,000 | ) | 0.35 | |||||||||
| Expired | (7,333 | ) | 0.35 | |||||||||
| Outside options outstanding at December 31, 2019 | 3,724,667 | 0.21 | 9.04 | |||||||||
| Forfeited | (195,333 | ) | 0.46 | |||||||||
| Expired | (477,334 | ) | 0.39 | |||||||||
| Outside options outstanding at December 31, 2020 | 3,052,000 | 0.46 | 8.07 | |||||||||
| Outside options exercisable at December 31, 2020 | 2,376,333 | 0.43 | 6.20 | |||||||||
| Outside options not vested at December 31, 2020 | 675,667 | |||||||||||
The aggregate grant date fair value of outside options granted during the year ended December 31, 2019 was $675,000.
The intrinsic value of exercisable but unexercised in-the-money outside options as of December 31, 2020 was approximately $401,583 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.
| F-60 |
The exercise prices of outside options outstanding and exercisable are as follows as of December 31, 2020:
| Exercise | Outstanding | Exercisable | ||||||
| Price | (Shares) | (Shares) | ||||||
| Under $1.00 | 3,052,000 | 2,376,333 | ||||||
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the outside options is provided under the heading Stock-Based Compensation.
Publisher Partner Warrants
On December 19, 2016, as amended on August 23, 2017, and August 23, 2018, the Board approved the Channel Partner Warrant Program to be administered by management that authorized the Company to grant Publisher Partner Warrants. As of December 31, 2020, Publisher Partner Warrants to purchase up to 2,000,000 shares of the Company’s common stock were reserved for grant.
The Publisher Partner Warrants had certain performance conditions. Pursuant to the terms of the Publisher Partner Warrants, the Company would notify the respective Publisher Partner of the number of shares earned, with one-third of the earned shares vesting on the notice date, one-third of the earned shares vesting on the first anniversary of the notice date, and the remaining one-third of the earned shares vesting on the second anniversary of the notice date. The Publisher Partner Warrants had a term of five years from issuance and could also be exercised on a cashless basis. Performance conditions are generally based on the average of number of unique visitors on the channel operation by the Publisher Partner generated during the six-month period from the launch of the Publisher Partner’s operations on the Company’s technology platform or the revenue generated during the period from the issuance date through a specified end date.
A summary of the Publisher Partner Warrants activity during the years ended December 31, 2020 and 2019 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Weighted | Remaining | |||||||||||
| Number | Average | Contractual | ||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Publisher Partner Warrants outstanding at January 1, 2019 | 1,017,140 | $ | 1.47 | 3.26 | ||||||||
| Forfeited | (77,599 | ) | 1.62 | |||||||||
| Publisher Partner Warrants outstanding at December 31, 2019 | 939,541 | 1.46 | 2.57 | |||||||||
| Forfeited | (150,000 | ) | ||||||||||
| Publisher Partner Warrants outstanding at December 31, 2020 | 789,541 | 1.34 | 1.50 | |||||||||
| Publisher Partner Warrants exercisable at December 31, 2020 | 463,041 | 1.31 | 1.52 | |||||||||
| Publisher Partner Warrants not vested at December 31, 2020 | 326,500 | |||||||||||
| Publisher Partner Warrants available for future grants at December 31, 2020 | 1,210,459 | |||||||||||
During the year ended December 31, 2020, the Company recognized incremental compensation costs as a result of the Exchange of $27,754 (see Note 21).
There was no intrinsic value of exercisable but unexercised in-the-money Publisher Partner Warrants since the fair market value of $0.60 per share of the Company’s common stock was lower than the exercise prices on December 31, 2020.
| F-61 |
The exercise prices of the Publisher Partner Warrants outstanding and exercisable are as follows as of December 31, 2020.
| Exercise | Outstanding | Exercisable | ||||||||
| Price | (Shares) | (Shares) | ||||||||
| Under $1.00 | 40,000 | 40,000 | ||||||||
| $ | 1.01 to $1.25 | 465,419 | 275,419 | |||||||
| $ | 1.26 to $1.50 | 68,277 | 68,277 | |||||||
| $ | 1.51 to $1.75 | 110,318 | 27,818 | |||||||
| $ | 1.76 to $2.00 | 104,449 | 50,449 | |||||||
| $ | 2.01 to $2.25 | 1,078 | 1,078 | |||||||
| 789,541 | 463,041 | |||||||||
Information with respect to compensation expense and unrecognized compensation expense related to the Publisher Partner Warrants is provided below.
Restricted Stock Units
On May 31, 2019, the Company issued 2,399,997 restricted stock units to certain employees in settlement of the true-up provisions of the restricted stock awards issued at the time of the HubPages merger. Each restricted stock unit represented the right to receive a number of the shares of the Company’s common stock pursuant to a grant agreement, subject to certain terms and conditions, and was to be credited to a separate account maintained by the Company in certain circumstances. All amounts credited to the separate account will be part of the general assets of the Company. The restricted stock units were to vest in accordance with the grant agreement in six equal installments at four-month intervals on the first of each month, starting on June 1, 2019, with the final vesting date on February 1, 2021. In addition to the vesting schedule as aforementioned, the restricted stock units would not vest until the Company increased its authorized shares of the Company’s common stock. Each restricted stock unit granted and credited to the separate account for the employee will be issued by the Company upon the authorized shares of the Company’s common stock increased (further details are provided in Note 21). Further, unless otherwise specified in an employee’s grant agreement, vesting will cease upon the termination of the employees continuous service.
The fair value of a restricted stock award is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date issued during the year ended December 31, 2019.
A summary of the restricted stock unit activity during the years ended December 31, 2020 and 2019 is as follows:
| Number of Shares | Weighted Average Grant-Date | |||||||||||
| Unvested | Vested | Fair Value | ||||||||||
| Restricted stock units outstanding at January 1, 2019 | - | - | $ | - | ||||||||
| Granted | 2,399,997 | - | 0.45 | |||||||||
| Restricted stock units outstanding at December 31, 2019 | 2,399,997 | - | 0.45 | |||||||||
| Forfeited | (2,399,997 | ) | - | |||||||||
| Restricted stock units outstanding at December 31, 2020 | - | - | - | |||||||||
As aforementioned (see Note 12), the restricted stock units were forfeited on December 31, 2020.
Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the restricted stock units is included within the Restricted Stock Awards caption under the heading Stock-Based Compensation.
| F-62 |
ABG Warrants
In connection with the Sports Illustrated Licensing Agreement and issuance of the ABG Warrants to purchase up to 21,989,844 shares of the Company’s common stock, the Company recorded the issuance of the warrants as stock-based compensation with the fair value of the warrants measured at the time of issuance and expensed over the requisite service period.
The fair value of the ABG Warrants issued during the year ended December 31, 2019 were calculated using the Monte Carlo model by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:
| Up-list | No Up-list | |||||||
| Risk-free interest rate | 2.00% – 2.10 | % | 2.00% – 2.10 | % | ||||
| Expected dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 51.00% – 52.00 | % | 121.00% – 123.00 | % | ||||
| Expected life | 6.0 – 7.3 years | 6.2 – 7.3 years | ||||||
A summary of the ABG Warrant activity during the years ended December 31, 2020 and 2019 is as follows:
| Number of Shares | Weighted Average Exercise | Weighted Average Remaining Contractual Life | ||||||||||||||
| Unvested | Vested | Price | (in years) | |||||||||||||
| ABG Warrants outstanding at January 1, 2019 | - | - | $ | - | ||||||||||||
| Issued | 21,989,844 | - | 0.63 | |||||||||||||
| ABG Warrants outstanding at December 31, 2019 | 21,989,844 | - | 0.63 | 9.46 | ||||||||||||
| Vested | (2,198,985 | ) | 2,198,985 | 0.63 | ||||||||||||
| ABG Warrants outstanding at December 31, 2020 | 19,790,859 | 2,198,985 | 0.63 | 8.46 | ||||||||||||
The aggregate issue date fair value of the ABG Warrants issued during the year ended December 31, 2019 was $5,458,979.
The intrinsic value of exercisable but unexercised in-the-money ABG Warrants as of December 31, 2020 was approximately $197,909 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.
Information with respect to compensation expense and unrecognized compensation expense related to the ABG Warrants is provided under the heading Stock-Based Compensation.
| F-63 |
Stock-Based Compensation
Stock–based compensation and equity-based expense charged to operations or capitalized during the years ended December 31, 2020 and 2019 are summarized as follows:
| Year Ended December 31, 2020 | ||||||||||||||||||||||||||||
| Restricted | Common | Common | Publisher | |||||||||||||||||||||||||
| Stock | Stock | Equity | Outside | Partner | ABG | |||||||||||||||||||||||
| Awards | Awards | Awards | Options | Warrants | Warrants | Totals | ||||||||||||||||||||||
| Cost of revenue | $ | 163,181 | $ | 156,043 | $ | 3,975,625 | $ | 8,394 | $ | 36,673 | $ | - | $ | 4,339,916 | ||||||||||||||
| Selling and marketing | 1,486,722 | 114,640 | 2,454,432 | 272,431 | - | - | 4,328,225 | |||||||||||||||||||||
| General and administrative | 317,982 | 615,604 | 3,439,803 | 150,577 | - | 1,449,074 | 5,973,040 | |||||||||||||||||||||
| Total costs charged to operations | 1,967,885 | 886,287 | 9,869,860 | 431,402 | 36,673 | 1,449,074 | 14,641,181 | |||||||||||||||||||||
| Capitalized platform development | 361,519 | 178,284 | 1,062,792 | 6,400 | - | - | 1,608,995 | |||||||||||||||||||||
| Total stock-based compensation | $ | 2,329,404 | 1,064,571 | $ | 10,932,652 | $ | 437,802 | $ | 36,673 | $ | 1,449,074 | $ | 16,250,176 | |||||||||||||||
| Year Ended December 31, 2019 | ||||||||||||||||||||||||||||
| Restricted | Common | Common | Publisher | |||||||||||||||||||||||||
| Stock | Stock | Equity | Outside | Partner | ABG | |||||||||||||||||||||||
| Awards | Awards | Awards | Options | Warrants | Warrants | Totals | ||||||||||||||||||||||
| Cost of revenue | $ | 122,192 | $ | 44,520 | $ | 774,632 | $ | 1,580 | $ | 50,828 | $ | - | $ | 993,752 | ||||||||||||||
| Selling and marketing | 34,393 | 100,388 | 455,280 | 242,399 | - | - | 832,460 | |||||||||||||||||||||
| General and administrative | 2,541,468 | 1,660,607 | 3,383,338 | 157,359 | - | 795,803 | 8,538,575 | |||||||||||||||||||||
| Total costs charged to operations | 2,698,053 | 1,805,515 | 4,613,250 | 401,338 | 50,828 | 795,803 | 10,364,787 | |||||||||||||||||||||
| Capitalized platform development | 535,004 | 175,837 | 590,618 | 5,931 | - | - | 1,307,390 | |||||||||||||||||||||
| Total stock-based compensation | $ | 3,233,057 | 1,981,352 | $ | 5,203,868 | $ | 407,269 | $ | 50,828 | $ | 795,803 | $ | 11,672,177 | |||||||||||||||
Unrecognized compensation expense related to the stock-based compensation awards and equity-based awards as of December 31, 2020 was as follows:
| As of December 31, 2020 | ||||||||||||||||||||||||||||
| Restricted Stock Awards | Common Stock Awards | Common Equity Awards | Outside Options | Publisher Partner Warrants | ABG Warrants | Totals | ||||||||||||||||||||||
| Unrecognized compensation expense | $ | 81,620 | $ | 371,932 | $ | 19,874,675 | $ | 283,388 | $ | - | $ | 3,214,102 | $ | 23,825,717 | ||||||||||||||
| Weighted average period expected to be recognized (in years) | 0.95 | 0.67 | 1.87 | 1.18 | - | 2.38 | 1.91 | |||||||||||||||||||||
| F-64 |
| 23. | Liquidated Damages |
The following tables summarize the Liquidated Damages recognized during the years ended December 31, 2020 and 2019, with respect to the registration rights agreements and securities purchase agreements:
| Year Ended December 31, 2020 | ||||||||||||||||
| 12% Convertible Debentures | Series I Preferred Stock | Series J Preferred Stock | Total Liquidated Damages | |||||||||||||
| Registration Rights Damages | $ | - | $ | 277,200 | $ | 360,000 | $ | 637,200 | ||||||||
| Public Information Failure Damages | 12,300 | 346,500 | 360,000 | 718,800 | ||||||||||||
| Accrued interest | 1,578 | 69,992 | 60,007 | 131,577 | ||||||||||||
| Balance | $ | 13,878 | $ | 693,692 | $ | 780,007 | $ | 1,487,577 | ||||||||
| Year Ended December 31, 2019 | ||||||||||||||||
| 12% Convertible Debentures | Series I Preferred Stock | Series J Preferred Stock | Total Liquidated Damages | |||||||||||||
| Registration Rights Damages | $ | - | $ | 138,600 | $ | - | $ | 138,600 | ||||||||
| Public Information Failure Damages | 102,246 | 69,300 | - | 171,546 | ||||||||||||
| Accrued interest | 16,162 | 262,193 | 140,015 | 418,370 | ||||||||||||
| Balance | $ | 118,408 | $ | 470,093 | $ | 140,015 | $ | 728,516 | ||||||||
| 24. | Income Taxes |
The components of the (provision) benefit for income taxes consist of the following:
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Current tax benefit: | ||||||||
| Federal | $ | - | $ | - | ||||
| State and local | - | - | ||||||
| Total current tax benefit | - | - | ||||||
| Deferred tax (provision) benefit: | ||||||||
| Federal | 20,677,960 | 9,802,070 | ||||||
| State and local | 5,279,879 | 3,053,709 | ||||||
| Change in valuation allowance | (26,168,671 | ) | 6,685,348 | |||||
| Total deferred tax (provision) benefit | (210,832 | ) | 19,541,127 | |||||
| Total income tax (provision) benefit | $ | (210,832 | ) | $ | 19,541,127 | |||
The CARES Act, was enacted March 27, 2020. Among the business provisions, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property. Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020 which provided additional COVID-19 relief provisions for businesses. The Company has evaluated the impact of both the Acts and has determined that any impact is not material to its financial statements.
| F-65 |
The components of deferred tax assets and liabilities were as follows:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 35,535,941 | $ | 20,998,172 | ||||
| Tax credit carryforwards | 263,873 | 263,873 | ||||||
| Allowance for doubtful accounts | 458,506 | 450,116 | ||||||
| Accrued expenses and other | 677,909 | 64,494 | ||||||
| Liquidated damages | 1,549,313 | 1,078,235 | ||||||
Unearned revenue | 2,356,111 | - | ||||||
| Stock-based compensation | 2,158,080 | 1,055,083 | ||||||
| Operating lease liability | 691,228 | 223,596 | ||||||
| Depreciation and amortization | 4,341,983 | 3,921,952 | ||||||
| Deferred tax assets | 48,032,944 | 28,055,521 | ||||||
| Valuation allowance | (29,653,417 | ) | (3,484,746 | ) | ||||
| Total deferred tax assets | 18,379,527 | 24,570,775 | ||||||
| Deferred tax liabilities: | ||||||||
| Prepaid expenses | (144,704 | ) | (148,051 | ) | ||||
Unearned revenue | - | (67,295 | ) | |||||
| Acquisition-related intangibles | (18,445,655 | ) | (24,355,429 | ) | ||||
| Total deferred tax liabilities | (18,590,359 | ) | (24,570,775 | ) | ||||
| Net deferred tax liabilities | $ | (210,832 | ) | $ | - | |||
The Company must make judgements as to the realization of deferred tax assets that are dependent upon a variety of factors, including the generation of future taxable income, the reversal of deferred tax liabilities, and tax planning strategies. To the extent that the Company believes that recovery is not likely, it must establish a valuation allowance. A valuation allowance has been established for deferred tax assets which the Company does not believe meet the “more likely than not” criteria. The Company’s judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If the Company’s assumptions and consequently its estimates change in the future, the valuation allowances it has established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. Based upon the Company’s historical operating losses and the uncertainty of future taxable income, the Company has provided a valuation allowance primarily against its deferred tax assets up to the deferred tax liabilities, except for deferred tax liabilities on indefinite lived intangible assets, as of December 31, 2020 and 2019.
As of December 31, 2020, the Company had federal, state, and local net operating loss carryforwards available of approximately $131.17 million, $100.61 million, and $31.15 million, respectively, to offset future taxable income. Net operating losses for U.S. federal tax purposes of $60.67 million do not expire (limited to 80% of taxable income in a given year) and $70.50 million will expire, if not utilized, through 2037 in various amounts. As of December 31, 2019, the Company had federal, state, and local net operating loss carryforwards available of approximately $75.00 million, $59.66 million, and $22.66 million, respectively, to offset future taxable income.
Sections 382 and 383 of the Internal Revenue Code imposes restrictions on the use of a corporation’s net operating losses, as well as certain recognized built-in losses and other carryforwards, after an ownership change occurs. A section 382 ownership change occurs if one or more stockholders or groups of stockholders who own at least 5% of the Company’s common stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Future issuances or sales of the Company’s common stock (including certain transactions involving the Company’s common stock that are outside of the Company’s control) could also result in an ownership change under section 382. If an ownership change occurs, Section 382 would impose an annual limit on the amount of pre-change net operating losses and other losses the Company can use to reduce its taxable income generally equal to the product of the total value of the Company’s outstanding equity immediately prior to the ownership change (subject to certain adjustments) and the long-term tax exempt interest rate for the month of the ownership change.
| F-66 |
The Company believes that it did have a change in control under these sections in connection with its recapitalization on November 4, 2016 and utilization of the carryforwards would be limited such that the majority of the carryforwards will never be available. Accordingly, the Company has not recorded those net operating loss carryforwards and credit carryforwards in its deferred tax assets. The Company completed a preliminary section 382 analysis as of December 31, 2019 and 2020 and concluded it may have experienced an ownership change as a result of certain equity offerings during the rolling three-year period of 2018 to 2020. The Company concluded that its federal net operating loss carryforwards, including any net operating loss carryforwards as a result of the mergers during 2018 and 2019, resulted in annual limitations on the overall net operating loss carryforward and that the ownership change during 2018, 2019 and 2020 would impose an annual limit on the net operating loss carryforwards and could cause federal income taxes (similar provisions apply for state and local income taxes) to be paid earlier than otherwise would be paid if such limitations were not in effect. The federal, state, and local net operating loss carryforwards are stated net of any such anticipated limitations as of December 31, 2020.
The provision (benefit) for income taxes on the statement of operations differs from the amount computed by applying the statutory federal income tax rate to loss before the benefit for income taxes, as follows:
| Years Ended December 31, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Federal benefit expected at statutory rate | $ | (18,694,437 | ) | 21.0 | % | $ | (12,188,924 | ) | 21.0 | % | ||||||
| State and local taxes, net of federal benefit | (5,279,879 | ) | 5.9 | % | (3,053,709 | ) | 5.3 | % | ||||||||
| Stock-based compensation | 1,768,735 | (2.0 | )% | 1,591,202 | (2.7 | )% | ||||||||||
| Unearned revenue | (5,120,330 | ) | 5.8 | % | (1,969,056 | ) | 3.4 | % | ||||||||
| Interest expense | 1,173,535 | (1.3 | )% | 1,015,199 | (1.7 | )% | ||||||||||
| Other differences, net | 152,294 | (0.2 | )% | 199,643 | (0.4 | )% | ||||||||||
| Valuation allowance | 26,168,671 | (29.4 | )% | (6,685,348 | ) | 11.5 | % | |||||||||
| Other permanent differences | 42,243 | 0.0 | % | 1,549,866 | (2.7 | )% | ||||||||||
| Tax provision (benefit) and effective income tax rate | $ | 210,832 | (0.2 | )% | $ | (19,541,127 | ) | 33.7 | % | |||||||
The Company recognizes the tax benefit from uncertain tax positions only if it is “more likely than not” that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company is also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to its unrecognized tax benefits will occur during the next 12 months.
The Company did not recognize any uncertain tax positions or any accrued interest and penalties associated with uncertain tax positions for the years ended December 31, 2020 and 2019. The Company files tax returns in the U.S. federal jurisdiction and New York, California, and other states. The Company is generally subject to examination by income tax authorities for three years from the filing of a tax return, therefore, the federal and certain state returns from 2017 forward and the California returns from 2016 forward are subject to examination. The Company currently is not under examination by any tax authority.
| 25. | Related Party Transactions |
On June 10, 2019, the Company entered into the 12% Senior Secured Note agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, pursuant to which the Company issued to the investor a 12% senior secured note, due July 31, 2019. In connection with the 12% Senior Secured Note, B. Riley FBR received a placement fee from the proceeds of $1,000,000 and legal fees and expenses of $135,000.
On June 14, 2019, the Company entered into the 12% Amended Senior Secured Note agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, which amended and restated the 12% Senior Secured Note dated June 10, 2019. In connection with the 12% Amended Senior Secured Note the Company paid B. Riley FBR cash of $2,400,000 as placement agent and $3,500,000 as a success fee in the offering.
| F-67 |
On June 28, 2019, the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which it issued an aggregate of 23,100 shares of Series I Preferred Stock at a stated value of $1,000, initially convertible into 46,200,000 shares of its common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.50 per share, for aggregate gross proceeds of $23,100,000. Of the shares of Series I Preferred Stock issued, Ross Levinsohn purchased 500 shares for $500,000. B. Riley FBR, acting as placement agent for the Series I Preferred Stock financing, was paid in cash $1,386,000 for its services and reimbursed for certain legal and other costs.
On August 27, 2019, the Company entered into a first amendment to amended note purchase agreement with one accredited investor, BRF Finance, an affiliated entity of B. Riley, with respect to the 12% Amended Senior Secured Notes. In connection with the 12% Amended Senior Secured Note, B. Riley FBR received a closing fee from the proceeds of $150,000 and legal fees and expenses.
On October 7, 2019, the Company closed on a securities purchase agreement with certain accredited investors, pursuant to which it issued an aggregate of 20,000 shares of Series H Preferred Stock at a stated value of $1,000, initially convertible into 28,571,428 shares of its common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of $20,000,000. Of the shares of Series H Preferred Stock issued, Luke E. Fichthorn III, an immediate family member of John A. Fichthorn, purchased 100 shares, and B Riley, or an affiliated entity, purchased 5,000 shares. B. Riley FBR, acting as placement agent for the Series J Preferred Stock financing, was paid in cash $525,240 for its services and reimbursed for certain legal and other costs.
On March 24, 2020, the Company entered into a second amended and restated note purchase agreement with BRF Finance, an affiliated entity of B. Riley, in its capacity as agent and a purchaser, which further amended and restated the amended and restated note purchase agreement dated June 14, 2019, as amended. Pursuant to the second amended and restated note purchase agreement, the Company issued the Term Note, in the aggregate principal amount of $12,000,000 to the purchaser. Up to $8,000,000 in principal amount under the Term Note was due on March 31, 2021, with the balance thereunder due on June 14, 2022. Interest on amounts outstanding under the Term Note are payable in-kind in arrears on the last day of each fiscal quarter. On March 25, 2020, the Company drew down $6,913,865 under the Term Note, and after payment of commitment and funding fees paid to BRF Finance in the amount of $793,109, and other legal fees and expenses of BRF Finance that the Company paid, it received net proceeds of approximately $6,000,000. Pursuant to Amendment 1 to the second amended and restated note purchase agreement, dated October 23, 2020, interest payable on the notes on September 30, 2020, December 31,2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts can be converted into shares of the Company’s common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments. In addition, $3,367,000, including $3,295,506 of principal amount of the Term Note and $71,494 of accrued interest, was converted into shares of Series K Preferred Stock and the maturity date of the Term Note was changed from March 31, 2021 to March 31, 2022. John A. Fichthorn, the Executive Chairman, served as Head of Alternative Investments for B. Riley Capital Management, a wholly owned subsidiary of B. Riley. Todd Sims, one of the Company’s directors, has served as the President of BRVC, a wholly owned subsidiary of B. Riley since October 2020. B. Riley FBR and its affiliates also beneficially owns more than 10% of our common stock. B. Riley FBR and its affiliates also beneficially owns more than 10% of the Company’s common stock.
Between August 14, 2020 and August 20, 2020, the Company entered into several securities purchase agreements for the sale of Series H Preferred Stock with certain accredited investors, including, among others, Strome and Strome Alpha Fund, L.P. (“Strome Alpha”), affiliates of Mark Strome, who previously beneficially owned more than 10% of the shares of the Company’s common stock and currently beneficially owns more than 10% of the shares of Series H Preferred Stock, pursuant to which the Company issued an aggregate of 2,253 shares, at a stated value of $1,000 per share, initially convertible into 6,825,000 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of $2,730,000 for working capital and general corporate purposes. B. Riley FBR, acting as a placement agent for these issuances, waived its fee for these services and was reimbursed for certain legal and other costs. On October 28, 2020, the Company entered into a mutual rescission agreement with Strome and Strome Alpha, pursuant to which the stock purchase agreements entered into by Strome and Strome Alpha between August 14, 2020 and August 20, 2020 were rescinded and deemed null and void.
| F-68 |
On September 4, 2020, the Company entered into a securities purchase agreement with certain accredited investors, pursuant to which the Company issued an aggregate of 10,500 shares of Series J Preferred Stock at a stated value of $1,000, initially convertible into shares of the Company’s common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of $6,000,000. Of the shares of Series J Preferred Stock issued, B. Riley Securities, Inc., an affiliate of B. Riley, purchased 5,250 shares, and B&W Pension Trust, of which 180 Degree Capital Corp. is the Investment Adviser, purchased 5,250 shares. B. Riley FBR, acting as placement agent for these issuances, waived its fee for these services and was reimbursed for certain legal and other costs. Todd Sims, one of the Company’s directors, has served as the President of BRVC, a wholly-owned subsidiary of B. Riley since October 2020. B. Riley FBR and its affiliates also beneficially owns more than 10% of the Company’s common stock.
Between October 23, 2020 and November 11, 2020, the Company entered into several securities purchase agreements with accredited investors, pursuant to which the Company issued an aggregate of 18,042 shares of Series K Preferred Stock at a stated value of $1,000 per share, initially convertible into 45,105,000 shares of the Company’s common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of $18,042,090. B. Riley FBR, acting as a placement agent for these issuances, was paid in cash $520,500 for its services and reimbursed for certain legal and other costs. John A. Fichthorn, the Executive Chairman, served as Head of Alternative Investments for B. Riley Capital Management, a wholly owned subsidiary of B. Riley. Todd Sims, one of the Company’s directors, has served as the President of BRVC, a wholly owned subsidiary of B. Riley since October 2020. B. Riley FBR and its affiliates also beneficially owns more than 10% of the Company’s common stock.
Cramer Digital, Inc. Agreement
On August 7, 2019, in connection with TheStreet Merger, the Company entered into a letter agreement (the “Original Cramer Agreement”) with finance and stock market expert Jim Cramer, who co-founded TheStreet, which sets forth the terms of the Cramer Services (defined below) to be provided by Mr. Cramer and Cramer Digital, Inc. (“Cramer Digital”), a production company owned and controlled by Mr. Cramer, featuring the digital rights and content created by Mr. Cramer and his team of financial experts. A second letter agreement providing additional terms was entered into on April 16, 2020 (the “Second Cramer Agreement”). The Company entered into a third letter agreement on January 25, 2021, which extended the notice date to cancel the third year of the term of the Original Cramer Agreement from February 7, 2021 to April 9, 2021 (the “Third Cramer Agreement” and, together with the Original Cramer Agreement and the Second Cramer Agreement, the “Cramer Agreement”).
The Cramer Agreement provides for Mr. Cramer and Cramer Digital to create content for the Company on each business day during the term of the Cramer Agreement, prepare special content for the Company, make certain personal appearances and provide other services as reasonably requested and mutually agreed to (collectively, the “Cramer Services”). In consideration for the Cramer Services, the Company pays Cramer Digital a commission on subscription revenues and net advertising revenues for certain content (the “Revenue Share”). In addition, the Company pays Cramer Digital approximately $3,000,000 as an annualized guaranteed payment in equal monthly draws, recoupable against the Revenue Share. The Company also issued two options to Cramer Digital pursuant to the 2019 Plan. The first option was to purchase up to two million shares of the Company’s common stock at an exercise price of $0.72, the closing stock price on August 7, 2019, the grant date. This option vests over 36 months. The second option was to purchase up to three million shares of the Company’s common stock at an exercise price of $0.54, the closing stock price on April 21, 2020, the grant date. In the event Cramer Digital and the Company agree to renew the term of the Cramer Agreement for a minimum of three years from the end of the second year of the current term, 900,000 shares will vest on the first day of the third year of the term as so extended (the “Trigger Date”). The remaining shares will vest equally on the 12-month anniversary of the Trigger Date, the 24-month anniversary of the Trigger Date and the 36-month anniversary of the Trigger Date.
In addition, the Company provides Cramer Digital with a marketing budget, access to personnel and support services, and production facilities. Finally, the Cramer Agreement provides that the Company will reimburse fifty percent of the cost of the rented office space by Cramer Digital, up to a maximum of $4,250 per month.
| F-69 |
Board of Directors and Finance Committee
During September 2018, John A. Fichthorn joined the Board and during November 2018 he was elected as Executive Chairman and Chairman of the Company’s Finance Committee. Until April 2020, Mr. Fichthorn served as Head of Alternative Investments for B. Riley Capital Management, which is an SEC-registered investment adviser and a wholly owned subsidiary of B. Riley. From April 2020 to November 2020, Mr. Fichthorn served as a consultant to B. Riley. Further, Mr. Fichthorn serves on our Board as a designee of the holders of our Series H Preferred Stock.
During September 2018, Todd D. Sims joined the Board and is also a member of the board of directors of B. Riley. Mr. Sims has served as the President of BRVC, a wholly owned subsidiary of B. Riley since October 2020. Prior to that, Mr. Sims served as a member of the board of directors of B. Riley from 2016 to 2020. Mr. Sims serves on the Company’s Board as a designee of B. Riley.
Since August 2018, B. Riley FBR has been instrumental in raising debt and equity capital for the Company to support its acquisitions of HubPages, Say Media, TheStreet, and the Sports Illustrated Licensing Agreement with ABG, with continued support for subsequent refinancing of debt, equity capital, and working capital purposes (see Note 27).
As of December 31, 2020, our Board was composed of seven persons – Ross Levinsohn, John Fichthorn, Peter Mills, Todd Sims, B. Rinku Sen, David Bailey, and Joshua Jacobs.
Service and Consulting Contracts
Ms. Rinku Sen joined the Board in November 2017 and has provided consulting services and operates a channel on the Company’s technology platform. During the years ended December 31, 2020 and 2019, the Company paid Ms. Sen $12,050 and $39,650, respectively, for these services.
Mr. Josh Jacobs has provided consulting services and operates a channel on the Company’s platform. During the years ended December 31, 2020, the Company paid Ms. Jacobs $120,000 for these services.
On January 1, 2019, the Company entered into an amended consulting agreement with William Sornsin, the Company’s former Chief Operating Officer, pursuant to which the Company agreed to pay a monthly fee of $10,000, plus various incentive payments for launching certain sites on the Company’s platform from January 2019 through September 2019.
On August 26, 2020, the Company entered into a consulting agreement with James C. Heckman, the Company’s former Chief Executive Officer pursuant to which the Company agreed to pay to Mr. Heckman a monthly fee of approximately $29,167 (to be increased to approximately $35,417 once the Company’s senior executive officer salaries are returned to the levels in place prior to March 2020). Mr. Heckman is also entitled to bonus payments of up to one hundred percent of the monthly fees payable in the then-current year upon satisfaction of certain performance goals. Mr. Heckman may also be awarded additional equity incentive awards. The initial term of the consulting agreement commenced on August 26, 2020 and ends on August 26, 2021, which term may be extended for an additional 12-month period unless our then-Chief Executive Officer notifies Mr. Heckman of a decision not to extend at least 90 days in advance.
On October 5, 2020, the Company entered into a separation agreement with Benjamin Joldersma, who served as the Company’s Chief Technology Officer from November 2016 through September 2020, pursuant to which the Company agreed to pay Mr. Joldersma approximately $111,000 as a severance payment, as well as any COBRA premiums.
Promissory Notes
In May 2018, the Company’s then Chief Executive Officer began advancing funds to the Company in order to meet minimum operating needs. Such advances were made pursuant to promissory notes that were due on demand, with interest at the minimum applicable federal rate, which ranged from 2.18% to 2.38%. As of December 31, 2019, the total principal amount of advances outstanding was $319,351 (includes accrued interest of $12,574) (see Note 17). On October 31, 2020, the Company entered into an exchange agreement with Mr. Heckman pursuant to which Mr. Heckman converted the outstanding principal amount due, together with accrued but unpaid interest under the promissory notes, into 389 shares of Series H Preferred Stock (see Note 20).
Repurchases of Restricted Stock
On December 15, 2020, the Company entered into an amendment for certain restricted stock awards and units that were previously issued to certain employees in connection with the HubPages merger, pursuant to which the Company agreed to repurchase from certain key personnel of HubPages, including Paul Edmondson, one of the Company’s officers, and his spouse, an aggregate of approximately 16,802 shares of the Company’s common stock at a price of $4 per share each month for a period of 24 months, for aggregate proceeds to Mr. Edmondson and his spouse of approximately $67,207 per month (see Note 12).
| F-70 |
| 26. | Commitments and Contingencies |
Revenue Guarantees
On a select basis, the Company has provided revenue share guarantees to certain independent publishers that transition their publishing operations from another platform to theMaven.net or maven.io. These arrangements generally guarantee the publisher a monthly amount of income for a period of 12 to 24 months from inception of the publisher contract that is the greater of (a) a fixed monthly minimum, or (b) the calculated earned revenue share. During the years ended December 31, 2020 and 2019, the Company paid Publisher Partner guarantees of $9,391,135 and $7,111,248, respectively.
Claims and Litigation
From time to time, the Company may be subject to claims and litigation arising in the ordinary course of business. The Company is not currently a party to any pending or threatened legal proceedings that it believes would reasonably be expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
Liquidated Damages
The Company determined that it is contingently liable for certain for the Registration Rights Damages and Public Information Failure Damages (collectively the “Liquidated Damages”) covering the instruments in the table below, therefore, a contingent obligation (including interest computed at 1% per month based on the balance outstanding for each Liquidating Damages) exist as of the issuance date of these consolidated financial statements as follows:
| Series H Preferred Stock | Series J Preferred Stock | Series K Preferred Stock | Total Liquidated Damages | |||||||||||||
| Registration Rights Damages | $ | - | $ | 360,000 | $ | - | $ | 360,000 | ||||||||
| Public Information Failure Damages | 7,854 | 360,000 | 1,082,520 | 1,450,374 | ||||||||||||
| Accrued interest | 153 | 7,437 | 2,817 | 10,407 | ||||||||||||
| $ | 8,007 | $ | 727,437 | $ | 1,085,337 | $ | 1,820,781 | |||||||||
| 27. | Subsequent Events |
The Company performed an evaluation of subsequent events through the date of filing of these consolidated financial statements with the SEC. Other than the below described subsequent events, there were no material subsequent events which affected, or could affect, the amounts or disclosures on the consolidated financial statements.
2019 Equity Incentive Plan
From January 2021 through the date these consolidated financial statements were issued or were available to be issued, the Company granted common stock options, restricted stock units and restricted stock awards totaling 83,590,165 (includes 11,158,049 stock options and 26,048,781 restricted stock units issued on February 18, 2021, see below for further details) shares of the Company’s common stock, of which 83,565,415 remain outstanding as of the date these consolidated financial statements were issued or were available to be issued, to acquire shares of the Company’s common stock to officers, directors, employees and consultants.
| F-71 |
On January 8, 2021, the Company amended certain grants of common stock options under its 2019 Plan to remove certain vesting conditions for the performance-based awards, in general, the amendment provides that:
| ● | the common stock options will vest with respect to one-third of the grant when the option holder completes one year of continuous service beginning on the grant date; and | |
| ● | the remaining common stock options will vest monthly over twenty-four months when the option holder completes each month of continuous service thereafter. |
On February 18, 2021, the Board approved an amendment to the Company’s 2019 Plan to increase the number of shares of the Company’s common stock, par value $0.01 per share, available for issuance under the 2019 Plan from 85,000,000 shares to 185,000,000 shares. Further, the Board approved up to an aggregate amount of 26,200,000 stock options to be made on or before March 18, 2021 for shares of the Company’s common stock to certain executive officers of the Company under the 2019 Plan. A total of 11,158,049 stock options were granted and designated as a non-qualified stock options, subject to certain terms and conditions.
On February 18, 2021, the Board approved the issuance of restricted stock units to certain executive officers of the Company under the 2019 Plan. A total of 26,048,781 restricted stock units were granted, subject to certain terms and conditions.
Appointments and Departures
On February 16, 2021, the Company announced the appointment of H. Robertson Barrett as the President of Maven Media Brands, LLC, a wholly owned subsidiary of Maven.
On March 9, 2021, the Company announced the appointment of Eric Semler as a director of the Company. On June 8, 2021, Mr. Semler resigned as a director of the Company.
On March 9, 2021, Josh Jacobs resigned as a director of the Company.
On June 10, 2021, David Bailey resigned as a director of the Company.
On June 11, 2021, the Company announced the appointment of Carlo Zola and Daniel Shribman as directors of the Company.
Preferred Stock
On May 4, 2021, a special committee of the Board declared a dividend of one preferred stock purchase right to be paid to the stockholders of record at the close of business on May 14, 2021 for (i) each outstanding share of the Company’s common stock and (ii) each share of the Company’s common stock issuable upon conversion of each share of the Company’s Series H Preferred Stock. Each preferred stock purchase right entitles the registered holder to purchase, subject to a rights agreement, from the Company one one-thousandth of a share of the Company’s newly created Series L Junior Participating Preferred Stock, par value $0.01 per share (the “Series L Preferred Stock”), at a price of $4.00, subject to certain adjustments. The Series L Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions paid to the holders of the Company’s common stock. The Series L Preferred Stock will be entitled to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or other transaction in which shares of the Company’s common stock are converted or exchanged, the Series L Preferred Stock will be entitled to receive 1,000 times the amount received per one share of the Company’s common stock.
| F-72 |
Long-Term Debt
12% Second Amended Senior Secured Notes – On May 19, 2021, the Company entered into an amendment to second amended and restated note purchase agreement (“Amendment 2”) with BRF Finance, an affiliated entity of B. Riley, in its capacity as agent for the purchasers and as purchaser, which further amended the 12% Second Amended Senior Secured Notes, dated March 24,2020, as amended. Pursuant to Amendment 2: (i) the interest rate on the 12% Second Amended Senior Secured Notes decreased from a rate of 12% per annum to a rate of 10% per annum; (ii) the interest rate on the Term Note decreased from a rate of 15% per annum to a rate of 10% per annum; and (iii) the Company agreed that within one (1) business day after receipt of cash proceeds from any issuance of equity interests, it will prepay the certain obligations in an amount equal to such cash proceeds, net of underwriting discounts and commissions; provided, that, this mandatory prepayment obligation does not apply to any proceeds that the Company received from shares of the Company’s common stock issued pursuant to the securities purchase agreement (as further described below under the heading Common Stock) during the 90-day period commencing on May 20, 2021.
The balance outstanding under the 12% Second Amended Senior Secured Notes as of the date these consolidated financial statements were issued or were available to be issued was approximately $60.1 million, which included outstanding principal of approximately $48.8 million, payment of in-kind interest of approximately $10.8 million that the Company was permitted to add to the aggregate outstanding principal balance, and unpaid accrued interest of approximately $0.5 million.
Delayed Draw Term Note – On May 19, 2021, pursuant to Amendment 2, the interest rate on the Term Note decreased from a rate of 15% per annum to a rate of 10% per annum.
The balance outstanding under the Term Note as of the date these consolidated financial statements were issued or were available to be issued was approximately $4.6 million, which included outstanding principal of approximately $3.5 million, and payment of in-kind interest of approximately $1.1 million that the Company was permitted to add to the aggregate outstanding principal balance.
Paycheck Protection Program Loan – On June 22, 2021, the SBA has authorized full forgiveness of $5,702,725 under the PPP Loan, where the Company will not need to make any payments on the PPP Loan that JPMorgan Chase facilitates as an SBA lender. JPMorgan Chase will apply the forgiveness amount the SBA authorized, plus all accrued interest, to the Company’s PPP Loan. The requirements under this program are established by the SBA. All requests for PPP Loan forgiveness are subject to SBA eligibility.
Common Stock
On May 20, 2021 and May 25, 2021, the Company entered into securities purchase agreements with several accredited investors, pursuant to which the Company sold an aggregate of 21,435,718 shares of its common stock, at a per share price of $0.70 for aggregate gross proceeds of approximately $15.0 million in a private placement.
On June 2, 2021, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold an aggregate of 7,142,857 shares of its common stock, at a per share price of $0.70 for gross proceeds of approximately $5.0 million in a private placement that was in addition to the closings that occurred on May 20, 2021 and May 25, 2021 as referenced above. The Company intends to use the proceeds for general corporate purposes.
Pursuant to the registration rights agreements entered into in connection with the securities purchase agreements, the Company agreed to register the shares of the Company’s common stock issued in the private placements. The Company committed to file the registration statement on the earlier of: (i) in the event the Company does not obtain a waiver from the holders of the shares of the Company’s common stock that were issued upon the conversion of the Series K Preferred Stock (the “Waiver”), within ten (10) calendar days following the date the Company’s registration statement(s) on Form S-1, registering for resale shares of the Company’s common stock that were issued in connection with offerings prior to the date of the registration rights agreement (the “Prior Registration Statements”), is declared effective by the SEC; and (ii) in the event the Company does obtain the Waiver, the earliest practicable date on which the Company is permitted by the SEC guidance to file the initial registration statement following the filing of the Prior Registration Statements (the “Filing Date”). The Company also committed to cause the registration statement to become effective by no later than 90 days after the Filing Date (or, in the event of a full review by the staff of the SEC, 120 days following the Filing Date). The registration rights agreement provides for Registration Rights Damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested pursuant to the securities purchase agreements.
| F-73 |
The security purchase agreements included a provision that requires the Company to maintain its periodic filings with the SEC in order to satisfy the public information requirements under Rule 144(c) of the Securities Act. If the Company fails for any reason to satisfy the current public information requirement at any time during the period commencing from the twelve (12) month anniversary of the date the Company becomes current in its filing obligations and ending at such time that all of the common stock may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) has ever been an issuer described in Rule 144(i)(1)(i) or becomes an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to such purchaser’s other available remedies, the Company shall pay to a purchaser, in cash, as partial liquidated damages and not as a penalty, an amount in cash equal to one percent (1.0%) of the aggregate subscription amount of the purchaser’s shares then held by the purchaser on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured up to a maximum of five (5) 30-day periods and (b) such time that such public information is no longer required for the purchasers to transfer the shares pursuant to Rule 144. Public Information Failure Damages shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Damages are incurred and (ii) the third (3rd) business day after the event or failure giving rise to the Public Information Failure Damages is cured. In the event the Company fails to make Public Information Failure Damages in a timely manner, such Public Information Failure Damages shall bear interest at the rate of 1.0% per month (prorated for partial months) until paid in full.
Heckman Stock Option Modifications
On June 3, 2021, the Company and Mr. Heckman, the Company’s former Chief Executive Officer, entered into an amendment to certain option grants under the Company’s 2016 Plan and 2019 Plan. The amendment to the 2016 Plan options, clarifies that the option qualifies as a non-statutory stock option and that it remains exercisable for the remainder of the term of the option. The amendment to the 2019 Plan options, clarifies that the option qualifies as a non-statutory stock option and that it remains exercisable for the remainder of the term of the option. The 2019 Plan amendment also changed the vesting schedule of the option to provide for immediate vesting of 2,000,000 shares of options, with the remainder of the options being subject to performance-based vesting that is tied to the price of the Company’s common stock.
Acquisition of College Spun Media Incorporated
On June 4, 2021, the Company acquired all of the issued and outstanding shares of capital stock of College Spun Media Incorporated for an aggregate of $11.0 million in cash and the issuance of an aggregate of 4,285,714 restricted shares of the Company’s common stock, with one-half of the shares vesting on the first anniversary of the closing date and the remaining one-half of the shares vesting on the second anniversary of the closing date. The cash payment consists of: (i) $10.8 million paid at closing (additional cash paid at closing of $0.8 million represents adjusted cash pursuant to the agreement), and (ii) $0.5 million to be paid on the first anniversary of the closing and $0.5 million to be paid on the second anniversary date of the closing, subject to a customary working capital adjustment based on cash and accounts receivable as of the closing date. The vesting of shares of the Company’s common stock is subject to the continued employment of certain selling employees.
| F-74 |
Exhibit 4.14
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
The following is a summary of all material characteristics of the capital stock of TheMaven, Inc., a Delaware corporation (“theMaven,” the “Company,” “we,” “us,” or “our”), as set forth in our Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and our Amended and Restated Bylaws (the “Bylaws”), and as registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The summary does not purport to be complete and is qualified in its entirety by reference to our Certificate of Incorporation and our Bylaws, each of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.14 is a part and to the provisions of the Delaware General Corporate Law (the “DGCL”). We encourage you to review complete copies of our Certificate of Incorporation and our Bylaws, and the applicable provisions of the DGCL for additional information.
General
Our authorized capital stock consists of 1,001,000,000 shares, divided into 1,000,000,000 shares of common stock, par value $0.01 per share (the “Common Stock”), and 1,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”). Under our Certificate of Incorporation, our board of directors (our “Board”) has the authority to issue such shares of Common Stock and Preferred Stock in one or more classes or series, with such voting powers, designations, preferences and relative, participating, optional or other special rights, if any, and such qualifications, limitations or restrictions thereof, if any, as shall be provided for in a resolution or resolutions adopted by our Board and filed as designations.
Common Stock
As of August 13, 2021, 263,441,879 shares of our Common Stock were outstanding.
Holders of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders, including the election of directors, and are entitled to receive dividends when and as declared by our Board out of funds legally available therefore for distribution to stockholders and to share ratably in the assets legally available for distribution to stockholders in the event of the liquidation or dissolution, whether voluntary or involuntary, of theMaven. We have not paid any dividends and do not anticipate paying any dividends on our Common Stock in the foreseeable future. It is our present policy to retain earnings, if any, for use in the development of our business. Our Common Stockholders have cumulative voting rights in the election of directors and have no preemptive, subscription, or conversion rights. Our Common Stock is not subject to redemption by us.
The transfer agent and registrar for our Common Stock is American Stock Transfer and Trust Company, LLC.
Preferred Stock
Of the 1,000,000 shares of Preferred Stock authorized, our Board has previously designated:
| ● | 2,000 shares of Preferred Stock as Series F Convertible Preferred Stock, none of which is currently outstanding; | |
| ● | 1,800 shares of Preferred Stock as Series G Convertible Preferred Stock; of which approximately 168 shares remain outstanding; | |
| ● | 23,000 shares of Preferred Stock as Series H Convertible Preferred Stock; of which 19,597 shares remain outstanding; | |
| ● | 25,800 shares of Preferred Stock as Series I Convertible Preferred Stock, all previously outstanding shares of which were converted into shares of our Common Stock on or about December 18, 2020; | |
| ● | 35,000 shares of Preferred Stock as Series J Convertible Preferred Stock, all previously outstanding shares of which were converted into shares of our Common Stock on or about December 18, 2020; | |
| ● | 20,000 shares of Preferred Stock as Series K Convertible Preferred Stock, all previously outstanding shares of which were converted into shares of our Common Stock on or about December 18, 2020; | |
| ● | 600,000 shares of Preferred Stock as Series L Junior Participating Preferred Stock, none of which is currently outstanding. |
Of the 1,000,000 shares of Preferred Stock, 292,400 shares of our Preferred Stock remain available for designation by our Board. Accordingly, our Board is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of Preferred Stock could have the effect of restricting dividends on the Common Stock, diluting the voting power of the Common Stock, impairing the liquidation rights of the Common Stock, or delaying or preventing a change in control of us, all without further action by our stockholders.
Series H Convertible Preferred Stock
The Series H Convertible Preferred Stock has a stated value of $1,000, convertible into shares of our Common Stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share. In addition, if at any time prior to the nine month anniversary of the closing date, we sell or grant any option or right to purchase or issue any shares of our Common Stock, or securities convertible into shares of our Common Stock, with net proceeds in excess of $1,000,000 in the aggregate, entitling any person to acquire shares of our Common Stock at an effective price per share that is lower than the then conversion price (such lower price, the “Base Conversion Price”), then the conversion price will be reduced to equal the Base Conversion Price. All the shares of Series H Preferred Stock automatically convert into shares of our Common Stock on the fifth anniversary of the closing date at the then-conversion price. The number of shares issuable upon conversion of the Series H Convertible Preferred Stock will be adjusted in the event of stock splits, stock dividends, combinations of shares, and similar transactions. Each share of Series H Convertible Preferred Stock is entitled to vote on an as-if-converted to Common Stock basis, subject to beneficial ownership blocker provisions and other certain conditions.
Rights Agreement and Series L Junior Participating Preferred Stock
On May 4, 2021, the Special Finance & Governance Committee of our Board declared a dividend of one preferred stock purchase right (each, a “Right”) for (i) each outstanding share of Common Stock and (ii) each share of Common Stock issuable upon conversion of each share of the Company’s Series H Convertible Preferred Stock. The dividend was paid to stockholders of record as of May 14, 2021. Each Right entitles the registered holder, subject to the terms of the Rights Agreement, dated as of May 4, 2021 (the “Rights Agreement”), to purchase from the Company one one-thousandth of a share of the Company’s Series L Junior Participating Preferred Stock at a price of $4.00, subject to certain adjustments (the “Exercise Price”).
In general terms, and subject to certain exceptions, the Rights Agreement works by significantly diluting the stock ownership of any person or group of affiliated or associated persons who, at any time after the date of the Rights Agreement, acquires, or obtains the right to acquire, beneficial ownership of 15% or more of the outstanding shares of our Common Stock, on a fully diluted basis without the approval of the Board.
Subject to certain exceptions, the Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an Acquiring Person (as defined below) or (ii) the close of business on the tenth business day after the commencement by any person of, or the first public announcement of the intention of any person to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”). “Acquiring Person” is a person or group of affiliated or associated persons who, at any time after the date of the Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the Company’s outstanding shares of Common Stock, including through such person’s ownership of the Company’s Preferred Stock. No such person or group of affiliated or associated persons having beneficial ownership of 15% or more of such outstanding shares at the time of the first announcement of adoption of the Rights Agreement will be deemed an Acquiring Person until such time as such person or group becomes the beneficial owner of additional shares of Common Stock (other than by reason of a stock dividend, stock split or other corporate action effected by the Company in which all holders of Common Stock are treated equally).
Each share of Series L Junior Participating Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, in each case, paid to holders of Common Stock during such period. Each share of Series L Junior Participating Preferred Stock will entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or other transaction in which shares of Common Stock are converted or exchanged, each share of Series L Junior Participating Preferred Stock will be entitled to receive 1,000 times the amount received per one share of Common Stock.
Because of the nature of the Series L Junior Participating Preferred Stock’s dividend, liquidation and voting rights, the value of the one one-thousandth interest in a share of Series L Junior Participating Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.
In the event that any person or group of persons becomes an Acquiring Person, each holder of a Right, other than the Rights beneficially owned by the Acquiring Person, affiliates and associates of the Acquiring Person and certain transferees thereof (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right that number of shares of Common Stock (or at the option of the Company, other securities of the Company) having a market value of two times the Exercise Price, unless the Rights were earlier redeemed or exchanged.
Our Board may amend or supplement the Rights Agreement without the approval of any holders of Rights, including, without limitation, in order to (a) cure any ambiguity, (b) correct inconsistent provisions, (c) alter time period provisions, including, without limitation, the expiration date, or (d) make additional changes to the Rights Agreement that our Board deems necessary or desirable. However, from and after the time when any person or group of persons becomes an Acquiring Person, the Rights Agreement may not be supplemented or amended in any manner that would adversely affect the interests of the holders of Rights (other than the holders of Rights that have become null and void in accordance with the Rights Agreement).
Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.
Certain Provisions of our Certificate of Incorporation, our Bylaws, and the DGCL
Certain provisions in our Certificate of Incorporation and Bylaws, as well as certain provisions of the DGCL, may be deemed to have an anti-takeover effect and may delay, deter, or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price of the shares held by stockholders. These provisions contained in our Certificate of Incorporation and Bylaws include the items described below.
| ● | Special Meetings of Stockholders. Our Bylaws provide that special meetings of our stockholders may be called only by a majority of our Board, the Chairman of our Board, our Chief Executive Officer, or President (in the absence of our Chief Executive Officer). | |
| ● | Stockholder Advance Notice Procedures. Our Bylaws provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely notice in writing and also specify requirements as to the form and content of a stockholder’s notice. These provisions may delay or preclude stockholders from bringing matters before a meeting of our stockholders or from making nominations for directors at a meeting of stockholders, which could delay or deter takeover attempts or changes in our management. | |
| ● | Exclusive Forum. Our Bylaws provide that unless we consent in writing to the selection of an alternative forum, the courts in the State of Delaware are, to the fullest extent permitted by applicable law, the sole and exclusive forum for any claims, including claims in the right of the Company, any action asserting a claim arising pursuant to any provision of the DGCL, our Certificate of Incorporation, or our Bylaws, any action to interpret, apply, enforce, or determine the validity of our Certificate of Incorporation or our Bylaws, or any action asserting a claim governed by the internal affairs doctrine. | |
| ● | Undesignated Preferred Stock. Because our Board has the power to establish the preferences and rights of the shares of any additional series of Preferred Stock, it may afford holders of any Preferred Stock preferences, powers, and rights, including voting and dividend rights, senior to the rights of holders of our Common Stock, which could adversely affect the holders of Common Stock and could discourage a takeover of us even if a change of control of theMaven would be beneficial to the interests of our stockholders. |
These, other provisions contained in our Certificate of Incorporation and Bylaws, and the Rights are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board. However, these provisions could delay or discourage transactions involving an actual or potential change in control of us, including transactions in which stockholders might otherwise receive a premium for their shares over then current prices. Such provisions could also limit the ability of stockholders to remove current management or approve transactions that stockholders may deem to be in their best interests.
In addition, we are subject to the provisions of Section 203 of the DGCL. Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the person became an interested stockholder, unless:
| ● | The board of directors of the corporation approved the business combination or other transaction in which the person became an interested stockholder prior to the date of the business combination or other transaction; |
| ● | Upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding, shares owned by persons who are directors and also officers of the corporation and shares issued under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
| ● | on or subsequent to the date the person became an interested stockholder, the board of directors of the corporation approved the business combination and the stockholders of the corporation authorized the business combination at an annual or special meeting of stockholders by the affirmative vote of at least 66-2/3% of the outstanding voting stock of the corporation that is not owned by the interested stockholder. |
A “business combination” includes mergers, asset sales, and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of a corporation’s voting stock.
Section 203 of the DGCL could depress our stock price and delay, discourage, or prohibit transactions not approved in advance by our Board, such as takeover attempts that might otherwise involve the payment to our stockholders of a premium over the market price of our Common Stock.
Exhibit 4.16
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
THEMAVEN, INC.
Warrant Shares: 10,994,922
Date of Issuance: June 14, 2019 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ABG-SI LLC, a Delaware limited liability company (“Licensor”), the registered holder hereof or its permitted assigns (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time or from time to time after the Issuance Date, but not after the Expiration Date (as defined below), to purchase from TheMaven, Inc., a Delaware corporation (the “Company”), up to 10,994,922 shares of Common Stock (as defined below) (the “Warrant Shares”) (as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price (as defined below) per share then in effect. This Warrant is being issued in connection with that certain Licensing Agreement, dated as of June 14, 2019, by and between the Company and Licensor (the “Licensing Agreement”).
1. EXERCISE OF WARRANT.
(a) Vesting of Performance-Based Warrant Shares. Subject to the terms and conditions of this Warrant, sixty percent (60%) of the Warrant Shares, being 6,596,953 Warrant Shares as of the Issuance Date, shall vest and become exercisable based on the achievement of a performance-based milestone (the “Performance-Based Warrant Shares”). The vesting of the Performance-Based Warrant Shares shall be based on Company Aggregate Gross Revenues (as defined below) in calendar years 2020, 2021, 2020 or 2023 (each, an “Annual Period”). Promptly, and in any event within 30 days, following the end of each Annual Period, the Company shall deliver to the Holder a written notice stating Company Aggregate Gross Revenues for such Annual Period, together with reasonable supporting documentation (each, an “Annual Notice”). If, in any one of the Annual Periods, Company Aggregate Gross Revenues is equal to or exceeds One Hundred and Thirty-Three Million Dollars ($133,000,000), all Performance-Based Warrant Shares shall vest and become exercisable as of the date of the applicable Annual Notice. All the Performance-Based Warrant Shares that shall not have vested and become exercisable as of or prior to the delivery of the Annual Notice for calendar year 2023 shall immediately and without any further action on the part of the Company or the Holder be forfeited by the Holder as of the date of such Annual Notice.
(b) Vesting of Time-Based Warrant Shares. Subject to the terms and conditions of this Warrant, forty percent (40%) of the Warrant Shares, being 4,397,969 Warrant Shares as of the Issuance Date, shall vest and become exercisable based on the achievement of time-based milestones (the “Time-Based Warrant Shares”). The Time-Based Warrant Shares shall vest and be exercisable in twenty-four (24) equal monthly increments commencing on the first anniversary of the Issuance Date; provided, however, that if the Licensing Agreement is terminated (other than any termination of the Licensing Agreement pursuant to Section 10(b) thereof), any unvested portion of the Time-Based Warrant Shares shall immediately and without any further action on the part of the Company or the Holder be forfeited by the Holder.
(c) Acceleration of Vesting. In the event that either (i) the Licensing Agreement is terminated by Licensor pursuant to Section 10(b) thereof, or (ii) a Change of Control Transaction (as defined below) shall occur, then, in each case, all of the Warrant Shares (other than any Warrant Shares that have been forfeited pursuant to Sections 1(a) and (b) above) shall automatically be vested and become exercisable.
(d) Mandatory Exercise. If on any date prior to the Expiration Date the volume weighted average price of one share of Common Stock traded on a Principal Market (as defined below) for a twenty (20) consecutive Trading Day period (“VWAP”) equals or exceeds One Dollar and Twenty-Five Cents ($1.25) (the “Mandatory Exercise Price”), the Company shall notify the Holder and, for a period of fifteen (15) days after such date, the Company shall have the right (but not the obligation) to require the Holder to exercise all (but not less than all) of the Warrant Shares, whether vested or unvested, by providing written notice of such requirement to the Holder, and all of the Warrant Shares shall automatically be vested and become exercisable regardless of whether such Warrant Shares had previously vested (other than any Warrant Shares that have been forfeited pursuant to Sections 1(a) and (b) above), and the Holder shall exercise the Warrant Shares within ninety (90) days of receipt of written notice of such requirement from the Company.
(e) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times prior to the Expiration Date for the number of Warrant Shares that are vested by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effectuate an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the third Trading Day (the “Warrant Share Delivery Date”) following the date on which the Company shall have received the Exercise Notice, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of vested Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”), and, further, shall (x) if the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, to any designee of the Holder to whom the Holder is permitted to transfer this Warrant, or any agent thereof, in each case to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or such designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the vested Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than five Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
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(f) Cashless Exercise. If the Market Price (as herein defined) of one share of Common Stock is greater than the Exercise Price, then Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
| Where | X = | the number of Warrant Shares to be issued to Holder. | |
| Y = | the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). | ||
| A = | the Market Price (at the date of such calculation). | ||
| B = | Exercise Price (as adjusted to the date of such calculation). |
(g) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.
2. ADJUSTMENTS. The Exercise Price, Mandatory Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Stock Dividends and Splits. If the Company, at any time on or after the date hereof while this Warrant remains outstanding, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) its then outstanding shares of Common Stock into a smaller number of shares, then in each such case each of the Exercise Price and the Mandatory Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
(b) Distribution of Assets. If the Company shall declare or make any dividend (other than in connection with a stock split, stock dividend or otherwise as contemplated in Section 2(a)) or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case each of the Exercise Price and the Mandatory Exercise Price shall be decreased, effective immediately after the record or other distribution date of such Distribution, by the amount of cash and/or fair market value (as determined in good faith by the Company’s Board of Directors after consultation with an investment banking firm of nationally recognized standing) of any securities or assets paid or distributed on each share of Common Stock in respect of such Distribution.
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(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price or Mandatory Exercise Price pursuant to Section 2(a) or Section 2(b), the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).
(d) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
3. CHANGE OF CONTROL TRANSACTIONS. If, at any time while this Warrant is outstanding, the Company effects any Change of Control Transaction (as defined below), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Change of Control Transaction, upon exercise of this Warrant, the number of shares of Common Stock or other capital stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any additional consideration or alternate consideration (collectively, the “Alternate Consideration”) receivable upon or as a result of such Change of Control Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Change of Control Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Change of Control Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Change of Control Transaction, then the Holder shall, to the extent practical, be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Change of Control Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Change of Control Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, the number of shares of Common Stock issuable under the Warrant to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
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5. RIGHT TO FUTURE STOCK ISSUANCES. Subject to the terms and conditions of this Section 5 and applicable securities laws, if at any time while this Warrant remains outstanding the Company proposes to offer or sell any New Securities, the Company shall give as much advance notice as is practicable in the circumstances (the “Offer Notice”) to the Holder, stating (a) its bona fide intention to offer such New Securities, (b) the number of such New Securities to be offered, and (c) the price and terms, if any, upon which it proposes to offer such New Securities; provided that the Company shall provide an additional Offer Notice upon any material modification to the price or terms of offer or sale of such New Securities, which additional Offer Notice shall be given as promptly as is practicable following any such modifications being agreed. By notification to the Company within seven (7) days after the Offer Notice is given, or on or before the day prior to the anticipated closing date of the sale of such New Securities, as advised by the Company in writing, if such sale is anticipated to close within seven (7) days of the date the Offer Notice is given, but in any event such date shall be not less than three (3) Business Days after the Offer Notice is given (the “Offer Period”), the Holder may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by the Holder (including all shares of Common Stock then issuable (directly or indirectly) upon full exercise of this Warrant (assuming the Warrant Shares are then fully vested) bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all preferred stock and any other derivative securities then outstanding). The closing of any sale of New Securities to the Holder pursuant to this Section 5 shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of the remaining New Securities to any other Person or Persons. The Company may, during the ninety (90) day period following the expiration of the Offer Period, offer and sell the remaining portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the remaining New Securities within ninety (90) days of the date that the Offer Notice is given, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Holder in accordance with this Section 5.
6. HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights (except as set forth under Section 5), or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
7. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
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8. TRANSFER.
(a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 8(b), (i) this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto as Exhibit C duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer, and (ii) the Warrant Shares shall be freely transferable, in whole or in part, at any time. With respect to the Warrant, upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, or at the time of the transfer of any Warrant Shares, the transfer of this Warrant or such Warrant Shares, as applicable, shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Warrant under the Securities Act.
(c) Certificates evidencing the Warrant Shares shall not contain any legend (including the legend set forth in Section 9(a)): (i) following any sale of such Warrant Shares pursuant to Rule 144, (ii) if such Warrant Shares are eligible for sale under Rule 144, after a one year aggregate holding period commencing on the date hereof has passed, or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Holder if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by the Holder, respectively. If all or any portion of the Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares and such resale is to be made, or if such Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Warrant Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 8(c), it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by the Holder to the Company or the Transfer Agent of a certificate representing Warrant Shares, as applicable, issued with a restrictive legend, deliver or cause to be delivered to the Holder a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 8. Certificates for Warrant Shares subject to legend removal hereunder shall be transmitted where possible by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with DTC as directed by the Holder. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s Principal Market as in effect on the date of delivery of a certificate representing Warrant Shares, as applicable, issued with a restrictive legend.
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9. COMPLIANCE WITH THE SECURITIES ACT.
(a) Agreement to Comply with the Securities Act; Legends. Subject to Section 8(c), the Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 9 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act. Subject to Section 8(c), this Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form (in addition to any legends required by any stockholders’ agreement, proxy or applicable law):
“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL OR (III) SUCH SECURITIES ARE SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:
(i) The original Holder is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.
(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In connection with the issuance of the Warrant, the Company represents, as of the date hereof, to the Holder as follows:
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(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
(b) The Company has the requisite power and authority to enter into and deliver this Warrant, perform its obligations herein, and consummate the transactions contemplated hereby. The Company has taken all necessary corporate action to authorize this Warrant. The Company has duly executed and delivered this Warrant, and this Warrant is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
(c) The authorized capital stock of the Company consists of (i) 100,000,000 shares of common stock, par value $0.01 (“Common Stock”), and (ii) 1,000,000 shares of preferred stock, par value $0.01 (“Preferred Stock”). Schedule A lists all of the issued and outstanding Common Stock and Preferred Stock as of the date hereof. All outstanding shares of Common Stock and Preferred Stock have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). Except as set in Schedule A, as of the date of this Warrant, there are no shares of Common Stock reserved for issuance. Except as set in Schedule A, the Company does not have any Rights outstanding with respect to Common Stock, and the Company does not have any commitment to authorize, make grants in respect of, issue or sell any Common Stock or Rights, except as required by this Warrant. As of the date of this Warrant, the Company has no contractual obligations to redeem, repurchase or otherwise acquire, or to register with the Commission, any shares of Common Stock. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which its stockholders may vote are issued and outstanding.
(d) Neither the Company’s execution of this Warrant nor the consummation of the transactions contemplated by this Warrant will (i) violate any provision of the Company’s certificate of incorporation or bylaws; (ii) violate any agreement to which the Company is a party; (iii) require any authorization, consent or approval of, exemption, or other action by, or notice to, any party; or (iv) violate any law or order to which the Company is subject.
(e) There is no claim, litigation, investigation, arbitration, or other proceeding against the Company outstanding or, to the knowledge of the Company, threatened, which, if adversely determined, could reasonably be expected to have a material and adverse effect on the ability of the Company to perform its obligations under this Warrant.
11. NOTICES. The Company will give notice to the Holder promptly upon each adjustment of the Exercise Price and the number of Warrant Shares and upon a Change of Control Transaction. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand; (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below:
If to the Company:
TheMaven, Inc.
1500 Fourth Avenue, Suite 200
Seattle, WA 98101
Attention: Legal Department
Email: legal@maven.io
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With a copy to (which shall not constitute notice hereunder):
Hand Baldachin & Associates LLP
8 West 40th Street, 12th Floor
New York, NY 10018
Attention: Alan Baldachin
E-mail: abaldachin@hballp.com
If to a Holder, to its address, facsimile number or e-mail address set forth herein or on the books and records of the Company.
12. AMENDMENT AND WAIVER. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
13. SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
14. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts or in the federal courts located in the State of New York, County of New York. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH OF THE HOLDER AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
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15. DISPUTE RESOLUTION. If the Holder disputes the determination of Company Aggregate Gross Revenues, the Holder shall submit the disputed determination via facsimile within ten (10) Business Days after receipt of the Annual Notice giving rise to such dispute to the Company. From and after receipt of such Annual Notice until the resolution of any dispute pursuant to the terms of this Section 15, the Company shall provide to the Holder and its agents and representatives reasonable access during normal business hours to the books and records of the Company and its Affiliates relating to the calculation of Company Aggregate Gross Revenues. If the Holder and the Company are unable to agree upon such determination (as the case may be) of Company Aggregate Gross Revenues within ten (10) Business Days of such disputed determination being submitted to the Company or the Holder (as the case may be), then the Company and the Holder shall jointly, within two (2) Business Days, submit via facsimile the disputed determination of Company Aggregate Gross Revenues to an independent, reputable, national investment bank reasonably agreed by the Company and the Holder. The Company and the Holder shall cause the investment bank to perform the determinations and notify the Company and the Holder of the results as soon as reasonably practicable. Such investment bank’s determination shall be binding upon all parties, absent demonstrable error. The fees and expenses of the investment bank shall be borne by the Company unless the number in question, as finally determined by such investment bank, is within three percent (3%) of the Company’s originally proposed number, in which case such fees and expenses shall be borne by the Holder.
16. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
17. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “ABG” means ABG Intermediate Holdings 2 LLC.
(b) “Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
(c) “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City, New York are authorized or required by law to remain closed.
(d) “Change of Control Transaction” means the occurrence of (i) an acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of capital stock of the Company entitling that person to fifty percent (50%) or more of the total voting power of all capital stock of the Company; (ii) the consolidation or merger of the Company with or into any other person, any merger of another person into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the Company’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding capital stock of the Company, and (y) pursuant to which holders of the Company’s capital stock immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all ownership interests or capital stock of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing the Company’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding capital stock into ownership interests or capital stock of the surviving entity; or (iii) a replacement at one time or within a one year period of more than one-half of the members of the Company’s Board of Directors which is not approved by a majority of those individuals who are members of the Company’s Board of Directors on the Issuance Date (or by those individuals who are serving as members of the Company’s Board of Directors on any date whose nomination to the Company’s Board of Directors was approved by a majority of the members of the Company’s Board of Directors who are members on the Issuance Date); provided that a change in the Company’s Board of Directors that is in connection with an uplisting to a national market or exchange will not be considered a Change of Control Transaction hereunder.
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(e) “Common Stock” means the Company’s common stock, and any other class of securities into which such securities may hereafter be reclassified or changed.
(f) “Company Aggregate Gross Revenues” means the aggregate gross revenues (calculated in accordance with GAAP) recognized by the Company pursuant to the Licensing Agreement and any other Contract pursuant to which the Company receives the right to use any other intellectual property of ABG or its controlled Affiliates or pursuant to which the Company provides services to ABG or ABG’s licensees.
(g) “Contract” means any contract, obligation, understanding, undertaking, arrangement, commitment, lease, license, purchase order, bid, promise or other agreement, in each case, whether written or oral.
(h) “Exercise Price” means Forty-Two Cents ($0.42), as it may be adjusted under the terms of this Warrant.
(i) “Expiration Date” means the ten-year anniversary of the Issuance Date.
(j) “GAAP” means generally accepted accounting principles in the United States as in effect from time to time.
(k) “Market Price” means the highest traded price of the Common Stock during the ten Trading Days prior to the date of the respective Exercise Notice.
(l) “New Securities” means any shares of capital stock of the Company, including Common Stock and any class or series of the Preferred Stock, whether or not now authorized, and rights, options or warrants to purchase such shares of Common Stock or Preferred Stock and securities of any type whatsoever that are, or may by their terms become, convertible into such shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, “New Securities” shall not include the following: (i) securities issued pursuant to options, warrants or other rights to acquire securities of the Company outstanding as of the date hereof as set forth in Schedule A, (ii) shares of Common Stock, or options or other rights to purchase Common Stock, issued or granted to employees, officers, directors and consultants of the Company pursuant to any one or more employee stock plans or agreements approved by a majority of the Company’s Board of Directors, (iii) securities issued pursuant to a registration statement filed by the Company under the Securities Act in which Preferred Stock that is excluded from the definition of “New Securities” is converted into Common Stock, (iv) securities issued by the Company as consideration for the acquisition of another corporation or other entity by the Company by merger, purchase of all or substantially all of the capital stock or assets, or other reorganization approved by a majority of the Board of Directors, (v) securities issued by the Company pursuant to a strategic partnership, joint venture or other similar arrangement approved by a majority of the Board of Directors where the primary purpose of the arrangement is not to raise capital, and (vi) securities issued or issuable to financial institutions or lessors in connection with bona fide real estate leases, commercial credit arrangements, equipment financings or similar transactions approved by a majority of the Board of Directors, including, but not limited to, equipment leases or bank lines of credit.
(m) “Person” means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other similar entity.
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(n) “Principal Market” means the primary national securities exchange or marketplace (including the over-the-counter markets) on which the Common Stock is then traded.
(o) “Rights” means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any other Person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such first Person.
(p) “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule.
(q) “Trading Day” means (i) any day on which the Common Stock is listed or quoted and traded on its Principal Market, (ii) if the Common Stock is not then listed or quoted and traded on any national securities exchange, then a day on which trading occurs on any over-the-counter markets, or (iii) if trading does not occur on the over-the-counter markets, any Business Day.
* * * * * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| THEMAVEN, INC. | ||
| Name: | Douglas B. Smith | |
| Title: | Chief Financial Officer | |
SCHEDULE A
CAPITALIZATION
| Actual Shares | As
Converted to Common Stock - Approved | |||||||
| Issued and Outstanding Shares | ||||||||
| Common Stock | 37,810,602 | 37,810,602 | ||||||
| Series G Convertible Preferred Stock | 168 | 0 | ||||||
| Series H Convertible Preferred Stock | 19,399 | 58,784,848 | ||||||
| Convertible Instruments | ||||||||
| Convertible Debentures | ||||||||
| December 2018 Convertible Debentures | 39,671,296 | |||||||
| March 2019 Convertible Debentures | 5,285,000 | |||||||
| Equity Incentive Plans | ||||||||
| 2016 Plan | 9,793,494 | |||||||
| 2019 Plan | 48,364,018 | |||||||
| Publisher Warrant and Biz Dev Option Programs | ||||||||
| Reserved for Issuance | 7,566,192 | |||||||
| Other Warrants and Options | ||||||||
| Outside Plan Options | 3,726,000 | |||||||
| L2 Capital Warrant | 1,066,963 | |||||||
| Strome Warrant | 1,500,000 | |||||||
| October 2018 Financing Warrants | 875,000 | |||||||
| Other Warrants | 327,489 | |||||||
| Reserved for Future Issuance | ||||||||
| Say Media Merger Consideration | 3,998,858 | |||||||
| Loan Rollover to Series H Preferred | 372 | 1,128,684 | ||||||
| TOTAL | 219,898,444 | |||||||
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
The Undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of TheMaven, Inc., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
[ ] a cash exercise with respect to _________________ Warrant Shares; or
[ ] by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant.
| Date: | _____________________________ |
| (Print Name of Registered Holder) | ||
| By: | ||
| Name: | ||
| Title: | ||
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EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 20__, from the Company and acknowledged and agreed to by _______________.
| Dated: | _____________________________ |
| THEMAVEN, INC. | ||
| Name: | ||
| Title: | ||
EXHIBIT C
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
For Value Received, the undersigned hereby sells, assigns, and transfers unto ____________________ the right to purchase _______________ shares of common stock of TheMaven, Inc., to which the within Common Stock Purchase Warrant relates and appoints ____________________, as attorney-in-fact, to transfer said right on the books of TheMaven, Inc. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
| Dated: | _____________________________ |
| (Signature) * | |
| (Name) | |
| (Address) | |
| (Social Security or Tax Identification No.) |
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
Exhibit 10.51
Exhibit 10.52
Exhibit 10.53
Exhibit 10.54
Exhibit 10.55
Exhibit 10.56
Exhibit 10.57
Exhibit 10.58
Exhibit 10.59
Exhibit 10.61
Exhibit 10.62
THEMAVEN, INC.
2016 STOCK INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
This Stock Option Award Agreement (“Agreement”) is made and entered into by and between THEMAVEN, INC., a Delaware corporation (the “Company”) and ___________ (“Participant”). This Agreement is entered into with reference to the 2016 Stock Incentive Plan of the Company (the “Plan”). All capitalized terms not defined in this Agreement have the meaning set forth in the Plan, the terms of which are incorporated herein.
| 1. | Grant. Subject to the Plan, the Company grants to the Participant an option (“Option”) to purchase shares of the common stock of the Company as follows: |
| Participant: | |
| Plan: | A copy of the Plan is attached hereto as Exhibit 1. |
| Grant Date: | |
| Vesting Start Date: | |
| Shares | Common Stock |
| Shares Subject to Option: | |
| Exercise Price: | |
| Type of Option: | |
| Option Expiration Date: | |
| (subject to early termination in accordance with Plan) | |
| Vesting Period: | |
| Vesting Schedule: |
THE GRANT OF THE OPTION IS MADE IN CONSIDERATION OF THE SERVICES TO BE RENDERED BY THE PARTICIPANT TO THE COMPANY AND IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN. THE OPTION MAY BE EXERCISED ONLY FOR WHOLE SHARES.
2. Option Provisions.
2.1 Termination. (a) Except as follows below, upon the termination of the continuous Service of the Participant with the Company and all Subsidiaries for any reason other than death, Disability, or Retirement, or if Participant’s Service is to a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues to provide Service to the Company or another Subsidiary), then (a) all vesting of the Option shall immediately cease and (b) any and all Options then held by the Participant will, to the extent vested as of such termination of Service, remain exercisable in full for a period of one (1) month after such termination of Service (but in no event after the expiration date of any such Option), unless the termination is for Cause. If termination of continuous Service is for Cause, all Options shall immediately terminate as further provided in the Plan. If the termination of continuous Service is due to Disability or Retirement, then the Option shall be exercisable as provided in the Plan.
2.2 Certain Definitions.
“Cause” (i) shall have the meaning, if any, ascribed such term in the employment or other agreement pursuant to which Participant provides Service to the Company contains a definition or (ii) otherwise, the meaning set forth in the Plan.
“Consultant” means a person, excluding Employees and Outside Directors, who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor and who qualifies as a consultant or advisor under Rule 701(c)(1) of the Securities Act or under Instruction A.1.(a)(1) of Form S-8 under the Securities Act.
“Employee” means any individual who is a common law employee of the Company, a Parent or a Subsidiary.
“Outside Director” means a member of the Board of Directors who is not an Employee.
“Service” means service as an Employee, Outside Director or Consultant.
2.3 Exercise. To exercise the Option, the Participant (or person then entitled to exercise the Option under the Plan) must deliver to the Company an executed stock option exercise agreement in such form as is approved by the Committee from time to time (“Exercise Agreement”), which shall set forth, inter alia: (a) the Participant’s election to exercise the Option; (b) the number of shares of Common Stock being purchased; (c) any restrictions imposed on the shares of Common Stock being purchased; and (d) such representations, warranties, and agreements regarding the Participant’s investment intent and access to information as may be required by the Company to comply with applicable securities laws.
2.4 Payment of Exercise Price. The Exercise Price of the Option shall be payable in full in cash, or its equivalent at the time of exercise in the manner then designated by the Committee, unless otherwise agreed by the Committee.
2.5 Vesting. All Options not vested will be terminated and forfeited upon the Participant’s termination of Service. Any and all Options that have not vested as provided in Section 1 of this Agreement shall terminate immediately upon the termination, for any reason whatsoever, of the Service of the Participant with the Company and all Subsidiaries, or if Participant is in the Service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the Service of the Company or another Subsidiary).
3. Taxation.
3.1 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“TaxRelated Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s sole responsibility. The Company makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any shares of Common Stock acquired on exercise and does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
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3.2 Disqualifying Disposition. If the Option is an ISO and the Participant disposes of the shares of Common Stock prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
4. Compliance with Law. The exercise of the Option and the issuance and transfer of the shares of Common Stock shall be subject to compliance by the Company and the Participant with any and all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Option unless and until any then-applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Participant understands that the Company is under no obligation to register the shares with the Securities and Exchange Commission, any state securities commission, or any stock exchange to effect such compliance.
5. General Terms.
5.1 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by electronic means intended to preserve the original graphic and pictorial appearance of a document will have the same effect as physical delivery of the paper document bearing an original signature.
5.2 Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled, or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s Service with the Company.
5.3 Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Delaware without regard to conflict of law principles.
5.4 Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
5.5 No Right to Continued Employment; No Rights as Shareholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to be retained in any position with the Company. Nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Service of Participant at any time, with or without Cause. The Participant shall not have any rights as a shareholder with respect to any shares of Common Stock subject to the Option unless and until certificates representing the shares have been issued by the Company to the holder of such shares, or the shares have otherwise been recorded on the books of the Company or of a duly authorized transfer agent as owned by such holder.
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5.6 Options Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
5.7 Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
5.8 Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the person(s) to whom this Agreement may be transferred by will or the laws of descent or distribution.
[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT TO FOLLOW]
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[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT]
| THEMAVEN, INC. | ||
| By: | ||
| Title: | C | |
| Date: | ||
| PARTICIPANT | ||
| Name: | ||
| Date: | ||
PARTICIPANT ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND THIS AGREEMENT. PARTICIPANT HAS READ AND UNDERSTANDS THE TERMS AND PROVISIONS THEREOF, AND ACCEPTS THE OPTION SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF THE PLAN AND THIS AGREEMENT. PARTICIPANT ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE OF THE OPTION OR DISPOSITION OF THE UNDERLYING SHARES AND THAT THE PARTICIPANT SHOULD CONSULT A TAX ADVISOR PRIOR TO SUCH EXERCISE OR DISPOSITION.
Attachments:
Exhibit 1- Plan
EXHIBIT 1
PLAN
See attached.
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Exhibit 10.63
TheMaven, inc.
2019 Equity Incentive Plan
Option Agreement
(Incentive Stock Option or Nonstatutory Stock Option)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option Agreement, TheMaven, Inc. (the “Company”) has granted you an option under its 2019 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan have the same definitions as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice. Unless otherwise specified in your Grant Notice, vesting will cease upon the termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share are specified in your Grant Notice, and may be adjusted from time to time for Capitalization Adjustments.
3. Exercise Restriction for Non-Exempt Employees. In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended, you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.
4. Exercise prior to Vesting (“Early Exercise”). If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates “Early Exercise Permitted”) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the unvested portion of your option; provided, however, that:
(a) a partial exercise of your option will be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that have not vested as of the date of exercise will be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement; and
(c) you must enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred.
5. Incentive Stock Option Limitation. If your option is an Incentive Stock Option, then a special limit applies that considers vesting and the value of the underlying shares of Common Stock. Specifically, to the extent the aggregate Fair Market Value (determined at the time of grant) of the shares of Common Stock covered by your option, plus all other Incentive Stock Options you hold, that are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions thereof that exceed such limit (according to the order in which they were granted) will be treated as Nonstatutory Stock Options.
6. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check, or in any other manner permitted by your Grant Notice, which may include one or more of the following:
(a) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T, as promulgated by the Federal Reserve Board, that prior to the issuance of Common Stock results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the aggregate exercise price, plus accrued interest, shall be due four (4) years from date of exercise or, at the Company’s election, upon termination of your Continuous Service.
(ii) Interest will be compounded at least annually and will be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the classification of your option as a liability for financial accounting purposes.
(iii) In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a promissory note and a pledge agreement covering the purchased shares of Common Stock, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.
(d) If your option is a Nonstatutory Stock Option, by reduction in the whole number of shares of Common Stock otherwise deliverable upon exercise of your option with a Fair Market Value less than or equal to the aggregate exercise price at the time of exercise.
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7. Whole Shares. You may exercise your option only for whole shares of Common Stock.
8. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
9. Term. You may not exercise your option before the commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for Cause;
(b) three (3) months after the termination of your Continuous Service for any reason other than Cause, Disability or death, provided that if during any part of such three (3)-month period you may not exercise your option solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
(c) twelve (12) months after the termination of your Continuous Service due to your Disability;
(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the day before the tenth (10th) anniversary of the Date of Grant.
Notwithstanding the foregoing, if you die during the period provided in Section 9(b) or 9(c) above, the term of your option shall not expire until the earlier of eighteen (18) months after your death, the Expiration Date indicated in your Grant Notice, or the day before the tenth (10th) anniversary of the Date of Grant.
If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit, but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
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10. Exercise.
(a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by you (other than those included in the registration, if any) during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act or such longer period as necessary to permit compliance with FINRA Rule 2711 and any other similar rule or regulation (the “Lock-Up Period”); provided, however, that nothing contained in this section shall prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock-Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with your obligations under this Section 10(d) or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, you agree to provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the foregoing restriction period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 10(d) and will have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
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11. Transferability. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, will thereafter be entitled to exercise your option. In addition, if permitted by the Company you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust, provided that you and the trustee enter into a transfer and other agreements required by the Company.
12. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
13. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.
(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence will not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock will be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure will be your sole responsibility.
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(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
14. Tax Consequences. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option. Because the Common Stock is not traded on an established securities market, the Fair Market Value is determined by the Board, perhaps in consultation with an independent valuation firm retained by the Company. You acknowledge that there is no guarantee that the Internal Revenue Service will agree with the valuation as determined by the Board, and you will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates in the event that the Internal Revenue Service asserts that the valuation determined by the Board is less than the “fair market value” as subsequently determined by the Internal Revenue Service. In addition, no election under Section 83(i) of the Code may be made with respect to the shares of the Common Stock issued upon exercise of your option, even if the election would otherwise be available with respect to the shares.
15. Notices. Any notices provided for in your option or the Plan will be given in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
* * * * *
This Agreement shall be deemed to be signed by the Company and the Optionholder upon the signing by the Optionholder of the Grant Notice to which it is attached.
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Exhibit 10.64
Exhibit 10.65
Exhibit 10.66
Exhibit 10.67
Exhibit 10.68
Exhibit 10.69
Exhibit 10.70
Exhibit 10.71
Exhibit 10.72
Exhibit 10.73
Exhibit 10.74
Exhibit 10.75
Exhibit 10.76
Exhibit 10.77
Exhibit 10.78
Exhibit 10.79
Exhibit 10.80
Exhibit 10.81
Exhibit 10.82
TheMaven, Inc.
Restricted Equity Award Grant Notice
(2019 Equity Incentive Plan)
TheMaven, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby awards to the person named below (the “Participant”) a Restricted Stock Award for the aggregate number of shares of the Company’s common stock (the “Common Stock”) set forth below (the “Award”). This Award is subject to all of the terms and conditions described below and in the Restricted Stock Award Agreement, the Plan, and the form of election under Section 83(b) of the Internal Revenue Code, all of which are attached hereto and incorporated herein in their entirety.
| Participant: | [●] | |
| Date of Grant: | [●] | |
| Vesting Commencement Date: | [●] | |
| Number of Shares Subject to Award: | [●], subject to the Company’s right of cancellation below | |
| Fair Market Value per Share: | [●] | |
| Aggregate Fair Market Value for the Shares: | [●] | |
| Consideration for Common Stock: | Participant’s services to the Company |
Vesting Schedule: The Award will vest as follows: ____________________, subject to Participant’s Continuous Service (as defined in the Plan) with the Company through the applicable vesting date[; provided, however, that upon a termination of Continuous Service by the Company or any Affiliate of the Company for a reason other than Cause (as defined in the Plan) or as a result of the Participant’s resignation for Good Reason (as defined Restricted Stock Award Agreement), then the Award will become fully vested immediately prior to such termination or resignation].
Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Award Grant Notice, the Restricted Stock Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Award Grant Notice, and the Restricted Stock Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of shares of Common Stock pursuant to the Award specified above and supersede all prior oral and written agreements on that subject with the exception of the following agreements only:
| Other Agreements: | |
| TheMaven, Inc. | Participant: | |||
| By: | ||||
| Signature | Signature | |||
| Name: | Name: | |||
| Title: | ||||
| Date: | Date: | |||
| Attachments: | Restricted Stock Award Agreement, 2019 Equity Incentive Plan, and form of Section 83(b) Election |
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ATTACHMENT I
TheMaven, Inc.
2019 Equity Incentive Plan
Restricted Stock Award Agreement
Pursuant to your Restricted Stock Award Grant Notice (“Grant Notice”) and this Restricted Stock Award Agreement (this “Agreement”), TheMaven, Inc. (the “Company”) has awarded you (“Participant”) a Restricted Stock Award under Section 6 of the Company’s 2019 Equity Incentive Plan (the “Plan”) for the aggregate number of shares indicated in the Grant Notice (collectively, the “Award”). Defined terms not explicitly defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of your Award, in addition to those set forth in the Grant Notice, are as follows:
1. Grant of Shares. By signing the Grant Notice, the Company hereby agrees to grant and issue to you, and you hereby agree to accept from the Company, the aggregate number of shares of Common Stock specified in your Grant Notice (the “Shares”), which aggregate number is subject to the Company’s right of cancellation as set forth in your Grant Notice, with a per-Share fair market value as specified in your Grant Notice, for the consideration set forth in Section 4 and subject to all of the terms and conditions of the Plan. Upon issuance of the Shares to you, you will be the sole owner of the Shares, subject to the provisions of the Plan and this Agreement, and Company will list you as a stockholder on its corporate books and records.
2. Vesting. Subject to the limitations contained herein, your Award will vest as provided in your Grant Notice. Unless otherwise specified in your Grant Notice, vesting will cease upon the termination of your Continuous Service.
3. Closing. Your acquisition of the Shares will be consummated as follows:
(a) You will acquire beneficial ownership of the Shares by delivering your Grant Notice, executed by you in the manner required by the Company, to the Corporate Secretary of the Company, or to such other person as the Company may designate, during regular business hours, on the date that you have executed the Grant Notice (or at such other time and place as you and the Company may mutually agree upon in writing) (the “Closing Date”) along with any consideration, other than your past or future services, required to be delivered by you by law on the Closing Date and such additional documents as the Company may then require.
(b) You hereby acknowledge and agree that the manner selected by the Company by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Agreement.
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(c) In the event of the termination of your Continuous Service prior to the Closing Date, the closing contemplated in this Agreement shall not occur.
4. Consideration. Unless otherwise required by law, the Shares to be delivered to you on the Closing Date will be deemed paid, in whole or in part in exchange for past and future services to be rendered to the Company or an Affiliate in the amounts and to the extent required by law. In the event additional consideration is required by law so that the Shares acquired under this Agreement are deemed fully paid and nonassessable, the Board will determine the amount and character of such additional consideration to be paid.
5. Restrictions on Unvested Shares. Unless and until the Shares have vested in the manner set forth in Section 2, the Shares, although issued in your name, may not (except as specifically authorized in this Agreement or under the Plan) be sold, transferred or otherwise disposed of, and may not be pledged or otherwise hypothecated. The Company may instruct the transfer agent for its Common Stock to place a legend on the certificates representing the Shares, or otherwise note its corporate records, as to the restrictions on transfer set forth in this Agreement and the Plan.
6. Rights as Stockholder. Subject to the provisions of this Agreement, you will have all rights and privileges of a stockholder of the Company with respect to the Shares, including with respect to any portion of the Shares that have not vested. You will be deemed to be the holder of the Shares for purposes of receiving any dividends or distributions that may be paid with respect to the Shares and for purposes of exercising any voting rights relating to the Shares, even if the Shares or a portion of the Shares have not yet vested and been released from the Company’s Reacquisition Right described below; provided, however, that the Company is under no duty to declare any such dividends; provided, further, that any dividends or distributions (other than regular quarterly cash dividends) paid with respect to shares of Common Stock subject to the unvested portion of the Shares will be subject to the same restrictions as the Shares to which such dividends or distributions relate.
7. Effect of Termination; Reacquisition Right. The Company will have a right to reacquire all or any part of the Shares (a “Reacquisition Right”) that have not as yet vested in accordance with the Vesting Schedule specified in your Grant Notice (the “Unvested Shares”) on the following terms and conditions:
(a) The Company will simultaneously with termination of your Continuous Service automatically reacquire for no consideration all of the Unvested Shares, unless the Company agrees to waive its Reacquisition Right as to some or all of the Unvested Shares. Any such waiver will be exercised by the Company by written notice to you or your representative within ninety (90) days after the termination of your Continuous Service, and the number of the Unvested Shares not being reacquired by the Company will be then released to you. If the Company does not waive its Reacquisition Right as to all of the Unvested Shares, then upon such termination of your Continuous Service, the number of Unvested Shares the Company is reacquiring will be transferred to the Company.
| - 3 - |
(b) If, from time to time, there is any stock dividend, stock split or other change in the character or amount of any of the outstanding stock of the Company or other entity the stock of which is subject to the provisions of your Award, then in such event any and all new, substituted or additional securities to which you are entitled by reason of your ownership of the Shares will be immediately subject to the Reacquisition Right with the same force and effect as the Shares subject to this Reacquisition Right immediately before such event.
8. Compliance with Law. You may not be issued any shares of Common Stock under your Award unless either (i) those shares are then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award must also comply with all other applicable laws and regulations governing the Award, and you will not receive the Shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
9. Transferability; Transfer Restrictions. Your Award is not transferable, except by will or by the laws of descent and distribution. After any Shares have been released to you from restricted book entry form, you will not sell, assign, hypothecate, donate, encumber, or otherwise dispose of any interest in the Shares except in compliance with the provisions herein, applicable securities laws and the Company’s policies.
10. Right of First Refusal. Shares of Common Stock that you acquire pursuant to your Award are subject to any right of first refusal that may be described in the Company’s bylaws or stockholders agreement in effect at such time the Company elects to exercise its right. The Company’s right of first refusal will expire on the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or quotation system
11. Right of Repurchase. To the extent provided in the Company’s bylaws or stockholders agreement in effect at such time the Company elects to exercise its right, the Company will have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to your Award.
12. Restrictive Legends. The shares of Common Stock issued under your Award will be endorsed with appropriate legends, if any, as determined by the Company.
13. Award not a Service Contract. Your Award is not an employment or service contract, and nothing in your Award will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of, or in any other service relationship with, the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your Award will obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
14. Withholding Obligations.
(a) In connection with receiving the Shares, or at any time thereafter as requested by the Company, you hereby authorize any required withholding from any amounts payable to you or otherwise agree to make adequate provision in cash for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the “Withholding Taxes”).
| - 4 - |
(b) Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company will have no obligation to instruct its transfer agent to release the Shares from restricted book entry form, and you agree that you will in such case have no right to receive such Shares.
15. Tax Consequences.
(a) In connection with receiving the Shares, you may elect to file an election under section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), which election is intended to accelerate the tax consequences of the transfer, regardless of the potential effect of the vesting schedule of Section 2 or the risk of forfeiture set forth in Section 7. The choice to file an 83(b) election is entirely at your discretion. An 83(b) election may be made on the form attached to the Grant Notice. If you elect to make an 83(b) election, the Company may in its discretion require you to contemporaneously make payment of all income and employment taxes required to be paid with respect to such election, or to otherwise make provision for the payment of such taxes; you will provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed 83(b) election with the Internal Revenue Service, and you agree to assume full responsibility for ensuring that the 83(b) election is actually and timely filed with the Internal Revenue Service and for all tax consequences resulting from the 83(b) election.
(b) You agree to review with your own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. You will rely solely on such advisors and not on any statements or representations of the Company or any of its agents. You understand that you (and not the Company) will be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement, including any election you make under section 83(b) of the Code.
16. Notices. Any notices required to be given or delivered to the Company under the terms of this Award will be in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
17. Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
18. Forfeiture; Clawback.
(a) In addition to the vesting conditions set forth in Section 2, your rights, payments and benefits with respect to the Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of your breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in your employment agreement with the Company and/or a restrictive covenant agreement that you enter into with the Company in connection with a termination of your Continuous Service for Cause, or other conduct by you that is detrimental to the business or reputation of the Company and/or its Affiliates.
| -5 - |
(b) Notwithstanding any other provisions in this Agreement, the Company may cancel the Award, require reimbursement of the Award by you, and effect any other right of recoupment of equity or other compensation provided in respect of the Award in accordance with any Company policies that may be adopted and/or modified from time to time (the “Clawback Policy”). In addition, you may be required to repay to the Company previously paid compensation, whether pursuant to this Agreement or otherwise in respect of the Award, in accordance with the Clawback Policy. By accepting the Award, you are agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
19. Certain Definitions.
(a) “Good Reason” will mean any of the following events, which has not been either consented to in advance by the Participant in writing or, with respect only to subsections (i), (ii), or (v) below, cured by the Company within a reasonable period of time, not to exceed 30 days, after the Participant provides written notice within 30 days of the initial existence of one or more of the following events: (i) a material reduction in compensation; (ii) a material diminution or reduction in the Participant’s responsibilities, duties or authority; (iii) requiring the Participant to take any action which would violate any federal or state law; or (iv) any requirement that the Participant relocate more than 50 miles. Good Reason shall not exist unless the Participant terminates Participant’s service within seventy-five (75) days following the initial existence of the condition or conditions that the Company has failed to cure, if applicable.
20. Miscellaneous.
(a) The rights and obligations of the Company under your Award shall be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by, the Company’s successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d) This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
| -6 - |
(e) The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
(f) The interpretation, performance and enforcement of this Agreement shall be governed by the law of the state of Delaware without regard to that state’s conflicts of laws rules.
(g) If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid.
* * * * *
This Agreement shall be deemed to be signed by the Company and the Participant upon the signing by the Participant of the Grant Notice to which it is attached.
| -7 - |
Attachment II
2019 Equity Incentive Plan
Attachment III
TheMaven, Inc.
2019 Equity Incentive Plan
ELECTION UNDER INTERNAL REVENUE CODE SECTION 83(B)
The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
| 1. | The name, address and taxpayer identification number of the undersigned is: | ||
| Name and Address of Taxpayer | Name and Address of Taxpayer’s Spouse | ||
|
Taxpayer Identification Number of Taxpayer |
Taxpayer Identification Number of Taxpayer’s Spouse: | ||
| 2. | Description of property with respect to which the election is made: |
| ______________ (____) shares of common stock (the “Shares”) of TheMaven, Inc. (the “Company”) | |
| 3. | The property was transferred during the calendar year _______. |
| 4. | The nature of the restrictions to which property is subject is as follows: |
| Pursuant to the terms of TheMaven, Inc. 2019 Equity Incentive Plan and corresponding Restricted Stock Award Grant Notice and Restricted Stock Award Agreement between the Company and the undersigned dated as of __________, _____, the Shares are subject to a vesting schedule as follows: ____________________________________. | |
| 5. | The fair market value of the property at the time of initial transfer (determined without regard to any lapse restriction, as defined in Treasury Regulations Section 1.83-3(i)) was $_________. |
| 6. | The amount paid for the property was $0. |
| 7. | A copy of this statement was reported to the Company and other persons as required pursuant to Treasury Regulations Section 1.83-2(d). |
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
| Dated: | |||
| Taxpayer | |||
| Dated: | |||
| Spouse of Taxpayer |
Exhibit 10.83
TheMaven,
Inc.
Restricted Stock Unit Grant Notice
(2019 Equity Incentive Plan)
TheMaven, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby awards to Participant a Restricted Stock Unit Award for the aggregate number of shares of the Company’s Common Stock set forth below (the “Award” or the “RSUs”). This Award is subject to all of the terms and conditions described below and in the Restricted Stock Unit Award Agreement and the Plan, each of which are attached hereto and incorporated herein in their entirety.
| Participant: | [●] | ||
| Date of Grant: | [●] | ||
| Vesting Commencement Date: | [●] | ||
| Number of Shares Subject to Award: | [●] | ||
| Consideration for Common Stock: | Participant’s services to the Company |
| Vesting Schedule: | [1/4th of the RSUs will vest on the one year anniversary of the Vesting Commencement Date; with the balance of the RSUs vesting in a series of thirty-six (36) successive equal monthly installments measured from the first anniversary of the Vesting Commencement Date.]
| ||
[In addition, the RSUs’ vesting will accelerate, and any outstanding portion of the Award will be fully vested, upon the occurrence of (i) a Corporate Transaction during your Continuous Service, and (ii) in connection with the Corporate Transaction, or within six (6) months following the Corporate Transaction, your Continuous Service ends.]
| |||
[Finally, as of the Date of Grant, the Company’s Board of Directors has adopted the Plan, but stockholder approval of both the Plan and an increase in the number of authorized shares to be available under the Plan is pending. For this reason, in addition to the vesting schedule described above, your Award will not vest at all until stockholders have approved the Plan and the requisite increase in authorized shares of Common Stock.]
| |||
| Settlement Date: | [ ] Upon vesting of the RSUs | ||
| [ ] Other: | |||
| Dividend Equivalents: | [ ] Will be credited | ||
| [ ] Will not be credited | |||
| Special Tax Withholding Right: | [ ] If this box is checked, you may direct the Company (i) to withhold, from shares otherwise issuable upon vesting of the Award, a portion of those shares with an aggregate fair market value (measured as of the vesting date) equal to the amount of the applicable withholding taxes, and (ii) to make a cash payment equal to such fair market value directly to the appropriate taxing authorities, as provided in Section 12 of the Award Agreement. | ||
| [ ] None | |||
Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of shares of Common Stock pursuant to the Award specified above and supersede all prior oral and written agreements on that subject with the exception of (i) Stock Awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only:
| Other Agreements: | ||
| TheMaven, Inc. | Participant: | |||
| By: | ||||
| Signature | Signature | |||
| Name: | Name: | |||
| Title: | ||||
| Date: | Date: | |||
| Attachments: Restricted Stock Unit Award Agreement and 2019 Equity Incentive Plan | ||||
ATTACHMENT I
TheMaven, Inc.
2019 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Pursuant to your Restricted Stock Unit Grant Notice (“Grant Notice”) and this Restricted Stock Unit Award Agreement (this “Agreement”), TheMaven, Inc. (the “Company”) has awarded you (“Participant”) a Restricted Stock Unit Award pursuant to Section 6(b) of the Company’s 2019 Equity Incentive Plan (the “Plan”) for the aggregate number of shares indicated in the Grant Notice (the “Award”). Defined terms not explicitly defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of your Award, in addition to those set forth in the Grant Notice, are as follows:
1. Grant of Restricted Stock Units. Your Award represents the right to receive the number of shares indicated in the Grant Notice, subject to the terms and conditions set forth in this Agreement and the Plan. Your Award will be credited to a separate account maintained for you on the books and records of the Company (the “Account”). All amounts credited to the Account will continue for all purposes to be part of the general assets of the Company.
2. Vesting. Subject to the limitations contained herein, your Award will vest as provided in your Grant Notice. Unless otherwise specified in your Grant Notice, vesting will cease upon the termination of your Continuous Service.
3. Consideration. Unless otherwise required by law, the Shares to be delivered to you on the Closing Date will be deemed paid, in whole or in part in exchange for past and future services to be rendered to the Company or an Affiliate in the amounts and to the extent required by law. In the event additional consideration is required by law so that the Shares acquired under this Agreement are deemed fully paid and nonassessable, the Board will determine the amount and character of such additional consideration to be paid.
4. Rights as Stockholder; Dividend Equivalents.
(a) You will not have any rights of a stockholder with respect to the shares of Common Stock underlying the Award unless and until the RSUs vest and are settled by the issuance of such shares of Common Stock. Upon and following the settlement of the RSUs, you will be the record owner of the shares of Common Stock underlying the RSUs unless and until such shares are sold or otherwise disposed of, and as record owner will be entitled to all rights of a stockholder of the Company (including voting rights).
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(b) If so indicated in your Grant Notice that dividend equivalents will be credited with respect to the Award, and if the Company declares a cash dividend on the shares of Common Stock prior to the settlement date of the RSUs, then, on the payment date of the dividend, your Account will be credited with dividend equivalents in an amount equal to the dividends that would have been paid to you if one share of Common Stock had been issued on the Date of Grant for each RSU granted to you as set forth in this Agreement and the Grant Notice.
5. Settlement of Restricted Stock Units.
(a) Subject to Sections 5(b) and 12, promptly following the vesting date as noted on the Grant Notice, and in any event no later than March 15 of the calendar year following the calendar year in which such vesting occurs, the Company will (i) issue and deliver to you the number of shares of Common Stock equal to the number of vested RSUs (and, if the Grant Notice indicates that dividend equivalents will be credited to you, cash equal to any dividend equivalents credited with respect to such vested RSUS and the interest thereon or, at the discretion of the Committee, shares of Common Stock having a Fair Market Value equal to such dividend equivalents and the interest thereon); and (ii) enter your name on the books of the Company as the stockholder of record with respect to the shares of Common Stock delivered to you.
(b) Notwithstanding Section 5(a), if the Grant Notice indicates that the settlement date for the Award is a date other than the vesting date is indicated in the Grant Notice, subject to Section 12, promptly following the settlement date as noted on the Grant Notice, the Company will (i) issue and deliver to you the number of shares of Common Stock equal to the number of vested RSUs (and, if the Grant Notice indicates that dividend equivalents will be credited to you, cash equal to any dividend equivalents credited with respect to such vested RSUS and the interest thereon or, at the discretion of the Committee, shares of Common Stock having a Fair Market Value equal to such dividend equivalents and the interest thereon); and (ii) enter your name on the books of the Company as the stockholder of record with respect to the shares of Common Stock delivered to you. If the settlement of your Award occurs in connection with your termination of Continuous Service, and you are deemed to be a “specified employee” within the meaning of Section 409A of the Code, as determined by the Board, as of the date of your termination, then to the extent necessary to prevent any accelerated or additional tax under Section 409A of the Code, such settlement will be delayed until the earlier of: (x) the date that is six months following your termination of Continuous Service and (y) your death.
6. Compliance with Law. You may not be issued any shares of Common Stock under your Award unless either (i) those shares are then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. As part of the issuance of shares of Common Stock under your Award, you will be required to sign a stock subscription or similar agreement, in which you will make various representations to the Company. Your Award must also comply with all other applicable laws and regulations governing the Award, and you will not receive the shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
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7. Transferability. Your Award is not transferable, except by will or by the laws of descent and distribution.
8. Right of First Refusal. Shares of Common Stock that you acquire upon settlement of your Award are subject to any right of first refusal that may be described in the Company’s bylaws or stockholders agreement in effect at such time the Company elects to exercise its right. The Company’s right of first refusal will expire on the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or quotation system.
9. Right of Repurchase. To the extent provided in the Company’s bylaws or stockholders agreement in effect at such time the Company elects to exercise its right, the Company will have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the settlement of your Award.
10. Restrictive Legends. The shares of Common Stock issued under your Award will be endorsed with appropriate legends, if any, as determined by the Company.
11. Award not a Service Contract. Your Award is not an employment or service contract, and nothing in your Award will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your Award will obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
12. Withholding Obligations.
(a) At the time your Award is settled, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the settlement of your Award (the “Withholding Taxes”).
(b) If specified in your Grant Notice, you may direct the Company to withhold a portion of the Shares with a Fair Market Value (measured as of the settlement date) equal to the amount of such Withholding Taxes; provided, however, that the number of any such Shares so withheld shall not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income.
(c) Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company will have no obligation to issue the shares of Common Stock in settlement of your Award to you.
| 3 |
13. Tax Consequences. You agree to review with your own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. You will rely solely on such advisors and not on any statements or representations of the Company or any of its agents. You understand that you (and not the Company) will be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your Award or your other compensation. The Award and this Agreement are intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A of the Code. In addition, no election under Section 83(i) of the Code may be made with respect to the shares of the Common Stock issued upon settlement of your Award, even if the election would otherwise be available with respect to the shares.
14. Notices. Any notices required to be given or delivered to the Company under the terms of this Award will be in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
15. Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
16. Miscellaneous.
(a) The rights and obligations of the Company under your Award shall be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by, the Company’s successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d) This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
| 4 |
(e) The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
(f) The interpretation, performance and enforcement of this Agreement shall be governed by the law of the state of Delaware without regard to that state’s conflicts of laws rules.
(g) If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid.
* * * * *
This Agreement shall be deemed to be signed by the Company and the Participant upon the signing by the Participant of the Grant Notice to which it is attached.
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Attachment II
2019 Equity Incentive Plan
Exhibit 10.84
THEMAVEN, INC.
STOCK OPTION AWARD AGREEMENT
This Stock Option Award Agreement (“Agreement”) is made and entered into by and between THEMAVEN, INC., a Delaware corporation (the “Company”) and Douglas B. Smith (“Participant”). This Agreement is entered into separate from any equity incentive or similar plan, however the provisions of Sections 2, 6, 7, 8, 9, 10, 11, 12 and 13 of the 2016 Stock Incentive Plan of the Company (the “Plan”) are incorporated herein by reference. All capitalized terms not defined in this Agreement have the meanings set forth in the Plan.
1. Grant. Subject to the Plan, the Company grants to the Participant an option (“Option”) to purchase shares of the common stock of the Company as follows:
| Participant: | Douglas B. Smith |
| Grant Date: | March 11, 2018 |
| Vesting Start Date: | March 1, 2018 |
| Shares: | Common Stock |
| Shares Subject to Option: | 500,000 |
| Exercise Price: | $0.57 per share |
| Type of Option: | Nonqualified Stock Option |
| Option Expiration Date: | March 11, 2029 |
| (subject to early termination in accordance with the terms of the Plan incorporated herein by reference) | |
| Vesting Terms: | Time Vesting (the “Time Vesting Overlay”): |
| ● | Subject to the Exchange Listing Condition: |
| ○ | The Option may be exercised with respect to the first 1/3 of the shares thereunder when Participant completes one year of continuous service (which shall include both service provided under the Service Agreement dated as of March 1, 2019 between Hampshire Road Advisors, LLC, of which Participant is the principal, and Maven Coalition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Continuous Service”)) beginning with the Vesting Start Date.
| ||
| ○ | The Option may be exercised with respect to an additional 1/36th of the shares thereunder when the Participant completes each month of Continuous Service thereafter. |
| Listing on an Exchange: (the “Exchange Listing Condition”): |
| ● | Subject to the Time Vesting Overlay, this Option may only be exercised after the Common Stock has been listed on (or is exchanged in full for the stock of a company listed, following such transaction, on) a securities exchange that has registered with the Securities and Exchange Commission under Section 6 of the Securities Exchange Act of 1934, as amended. |
| In addition, the Option vesting will accelerate with respect to the Time Vesting Overlay only, and any outstanding portion of the Option will be fully vested, upon the occurrence of (i) a Corporate Transaction during your Continuous Service, and (ii) in connection with the Corporate Transaction, or within six (6) months following the Corporate Transaction, Participant’s Continuous Service ends. | |
“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: | |
(i) the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries; | |
(ii) the consummation of a sale or other disposition of more than fifty percent (50%) of the outstanding securities of the Company; | |
| (iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or | |
| (iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise. |
THE GRANT OF THE OPTION IS MADE IN CONSIDERATION OF THE SERVICES TO BE RENDERED BY THE PARTICIPANT TO THE COMPANY AND IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE. THE OPTION MAY BE EXERCISED ONLY FOR WHOLE SHARES.
2. Option Provisions.
2.1 Termination. Upon the termination of the employment of the Participant with the Company and all Subsidiaries for any reason other than death, Disability, or Retirement, or if Participant is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ of the Company or another Subsidiary), then (a) all vesting of the Option shall immediately cease and (b) any and all Options then held by the Participant will, to the extent vested as of such termination of employment, remain exercisable in full for a period of one (1) month after such termination of employment (but in no event after the expiration date of any such Option), unless the termination is for Cause. If termination of employment is for Cause (as defined in the Employment Agreement), all Options shall immediately terminate as further provided in the Plan. If the termination of employment is due to Disability or Retirement, then the Option shall be exercisable as provided in the Plan.
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2.2 Exercise. To exercise the Option, the Participant (or person then entitled to exercise the Option under the Plan) must deliver to the Company an executed stock option exercise agreement in such form as is approved by the Committee from time to time (“Exercise Agreement”), which shall set forth, inter alia: (a) the Participant’s election to exercise the Option; (b) the number of shares of Common Stock being purchased; (c) any restrictions imposed on the shares of Common Stock being purchased; and (d) such representations, warranties, and agreements regarding the Participant’s investment intent and access to information as may be required by the Company to comply with applicable securities laws.
The shares that may be issued on exercise of this Option, at the time of the grant hereof, are not authorized and available for issuance, therefore this Option is currently considered an unfunded option. The Participant agrees that no part of this Option may be exercised until the later of the increase in the authorized shares of common stock in sufficient number of shares to permit the exercise from time to time of this Option or the later respective vesting and exercise date as set forth herein.
2.3 Payment of Exercise Price. The Exercise Price of the Option shall be payable in full in cash, or its equivalent at the time of exercise in the manner then designated by the Committee, unless otherwise agreed by the Committee.
2.4 Vesting. All Options not vested will be terminated and forfeited upon the Participant’s termination of employment. Any and all Options that have not vested as provided in Section 1 of this Agreement shall terminate immediately upon the termination, for any reason whatsoever, of the employment of the Participant with the Company and all Subsidiaries, or if Participant is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ of the Company or another Subsidiary).
3. Taxation.
3.1 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s sole responsibility. The Company makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any shares of Common Stock acquired on exercise and does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
3.2 Disqualifying Disposition. If the Option is an ISO and the Participant disposes of the shares of Common Stock prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
4. Compliance with Law. The exercise of the Option and the issuance and transfer of the shares of Common Stock shall be subject to compliance by the Company and the Participant with any and all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Option unless and until any then-applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Participant understands that the Company is under no obligation to register the shares with the Securities and Exchange Commission, any state securities commission, or any stock exchange to effect such compliance.
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5. General Terms.
5.1 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by electronic means intended to preserve the original graphic and pictorial appearance of a document will have the same effect as physical delivery of the paper document bearing an original signature.
5.2 Discretionary Nature of Plan. The provisions of the Plan incorporated herein are discretionary and may be amended, cancelled, or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company.
5.3 Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Delaware without regard to conflict of law principles.
5.4 Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
5.5 No Right to Continued Employment; No Rights as Shareholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to be retained in any position with the Company. Nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the employment of Participant at any time, with or without Cause. The Participant shall not have any rights as a shareholder with respect to any shares of Common Stock subject to the Option unless and until certificates representing the shares have been issued by the Company to the holder of such shares, or the shares have otherwise been recorded on the books of the Company or of a duly authorized transfer agent as owned by such holder.
5.6 Options Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
5.7 Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
5.8 Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the person(s) to whom this Agreement may be transferred by will or the laws of descent or distribution.
[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT TO FOLLOW]
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[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT]
| THEMAVEN, INC. | ||
| /s/ Paul Edmondson | ||
| By: | Paul Edmondson | |
| Title: | Chief Operating Officer | |
| Date: | March 11, 2019 | |
| PARTICIPANT | ||
| /s/ Douglas B. Smith | ||
| Name: | Douglas B. Smith | |
| Date: | March 11, 2019 | |
PARTICIPANT ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND THIS AGREEMENT. PARTICIPANT HAS READ AND UNDERSTANDS THE TERMS AND PROVISIONS THEREOF, AND ACCEPTS THE OPTION SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF THE PLAN THAT ARE INCORPORATED HEREIN BY REFERENCE AND THIS AGREEMENT. PARTICIPANT ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE OF THE OPTION OR DISPOSITION OF THE UNDERLYING SHARES AND THAT THE PARTICIPANT SHOULD CONSULT A TAX ADVISOR PRIOR TO SUCH EXERCISE OR DISPOSITION.
Attachments:
Exhibit 1- Plan
| 5 |
EXHIBIT 1
PLAN
See attached.
| 6 |
Exhibit 10.85
THEMAVEN, INC.
STOCK OPTION AWARD AGREEMENT
This Stock Option Award Agreement (“Agreement”) is made and entered into by and between THEMAVEN, INC., a Delaware corporation (the “Company”) and Douglas B. Smith (“Participant”). This Agreement is entered into separate from any equity incentive or similar plan, however the provisions of Sections 2, 6, 7, 8, 9, 10, 11, 12 and 13 of the 2016 Stock Incentive Plan of the Company (the “Plan”) are incorporated herein by reference. All capitalized terms not defined in this Agreement have the meanings set forth in the Plan.
1. Grant. Subject to the Plan, the Company grants to the Participant an option (“Option”) to purchase shares of the common stock of the Company as follows:
| Participant: | Douglas B. Smith |
| Grant Date: | March 11, 2019 |
| Vesting Start Date: | March 1, 2019 |
| Shares: | Common Stock |
| Shares Subject to Option: | 1,000,000 |
| Exercise Price: | $0.57 per share |
| Type of Option: | Nonqualified Stock Option |
| Option Expiration Date: | March 11, 2029 |
| (subject to early termination in accordance with the terms of the Plan incorporated herein by reference) | |
| Vesting Period: | Monthly vesting over 36 months, with 1/3 vesting after 12 months of Continuous Service (which shall include both service provided under the Service Agreement dated as of March 1, 2019 between Hampshire Road Advisors, LLC, of which Participant is the principal, and Maven Coalition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Continuous Service”)) following the Vesting Start Date and 1/36th vesting at the end of each month of Continuous Service thereafter, each as described in the stock option documents
In addition, the Option vesting will accelerate, and any outstanding portion of the Option will be fully vested, upon the occurrence of (i) a Corporate Transaction during Participant’s Continuous Service, and (ii) in connection with the Corporate Transaction, or within six (6) months following the Corporate Transaction, Participant’s Continuous Service ends.
“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
|
| (i) the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries; | |
(ii) the consummation of a sale or other disposition of more than fifty percent (50%) of the outstanding securities of the Company;
| |
| (iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or | |
| (iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise. |
THE GRANT OF THE OPTION IS MADE IN CONSIDERATION OF THE SERVICES TO BE RENDERED BY THE PARTICIPANT TO THE COMPANY AND IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE. THE OPTION MAY BE EXERCISED ONLY FOR WHOLE SHARES.
2. Option Provisions.
2.1 Termination. Subject to the provisions of the Vesting Period set forth above, upon the termination of the employment of the Participant with the Company and all Subsidiaries for any reason other than death, Disability, or Retirement, or if Participant is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ of the Company or another Subsidiary), then (a) all vesting of the Option shall immediately cease and (b) any and all Options then held by the Participant will, to the extent vested as of such termination of employment, remain exercisable in full for a period of one (1) month after such termination of employment (but in no event after the expiration date of any such Option), unless the termination is for Cause. If termination of employment is for Cause (as defined in the Employment Agreement), all Options shall immediately terminate as further provided in the Plan. If the termination of employment is due to Disability or Retirement, then the Option shall be exercisable as provided in the Plan.
2.2 Exercise. To exercise the Option, the Participant (or person then entitled to exercise the Option under the Plan) must deliver to the Company an executed stock option exercise agreement in such form as is approved by the Committee from time to time (“Exercise Agreement”), which shall set forth, inter alia: (a) the Participant’s election to exercise the Option; (b) the number of shares of Common Stock being purchased; (c) any restrictions imposed on the shares of Common Stock being purchased; and (d) such representations, warranties, and agreements regarding the Participant’s investment intent and access to information as may be required by the Company to comply with applicable securities laws.
The shares that may be issued on exercise of this Option, at the time of the grant hereof, are not authorized and available for issuance, therefore this Option is currently considered an unfunded option. The Participant agrees that no part of this Option may be exercised until the later of the increase in the authorized shares of common stock in sufficient number of shares to permit the exercise from time to time of this Option or the later respective vesting and exercise date as set forth herein.
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2.3 Payment of Exercise Price. The Exercise Price of the Option shall be payable in full in cash, or its equivalent at the time of exercise in the manner then designated by the Committee, unless otherwise agreed by the Committee.
2.4 Vesting. All Options not vested will be terminated and forfeited upon the Participant’s termination of employment. Any and all Options that have not vested as provided in Section 1 of this Agreement shall terminate immediately upon the termination, for any reason whatsoever, of the employment of the Participant with the Company and all Subsidiaries, or if Participant is in the employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ of the Company or another Subsidiary).
3. Taxation.
3.1 Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s sole responsibility. The Company makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any shares of Common Stock acquired on exercise and does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
3.2 Disqualifying Disposition. If the Option is an ISO and the Participant disposes of the shares of Common Stock prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
4. Compliance with Law. The exercise of the Option and the issuance and transfer of the shares of Common Stock shall be subject to compliance by the Company and the Participant with any and all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Option unless and until any then-applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Participant understands that the Company is under no obligation to register the shares with the Securities and Exchange Commission, any state securities commission, or any stock exchange to effect such compliance.
5. General Terms.
5.1 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by electronic means intended to preserve the original graphic and pictorial appearance of a document will have the same effect as physical delivery of the paper document bearing an original signature.
5.2 Discretionary Nature of Plan. The provisions of the Plan incorporated herein are discretionary and may be amended, cancelled, or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company.
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5.3 Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Delaware without regard to conflict of law principles.
5.4 Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
5.5 No Right to Continued Employment; No Rights as Shareholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to be retained in any position with the Company. Nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the employment of Participant at any time, with or without Cause. The Participant shall not have any rights as a shareholder with respect to any shares of Common Stock subject to the Option unless and until certificates representing the shares have been issued by the Company to the holder of such shares, or the shares have otherwise been recorded on the books of the Company or of a duly authorized transfer agent as owned by such holder.
5.6 Options Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
5.7 Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
5.8 Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the person(s) to whom this Agreement may be transferred by will or the laws of descent or distribution.
[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT
TO FOLLOW]
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[SIGNATURE PAGE TO STOCK OPTION AWARD AGREEMENT]
| THEMAVEN, INC. | ||
| /s/ Paul Edmondson | ||
| By: | Paul Edmondson | |
| Title: | Chief Operating Officer | |
| Date: | March 11, 2019 | |
| PARTICIPANT | ||
| /s/ Douglas B. Smith | ||
| Name: | Douglas B. Smith | |
| Date: March 11, 2019 | ||
PARTICIPANT ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND THIS AGREEMENT. PARTICIPANT HAS READ AND UNDERSTANDS THE TERMS AND PROVISIONS THEREOF, AND ACCEPTS THE OPTION SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF THE PLAN THAT ARE INCORPORATED HEREIN BY REFERENCE AND THIS AGREEMENT. PARTICIPANT ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE OF THE OPTION OR DISPOSITION OF THE UNDERLYING SHARES AND THAT THE PARTICIPANT SHOULD CONSULT A TAX ADVISOR PRIOR TO SUCH EXERCISE OR DISPOSITION.
Attachments:
Exhibit 1- Plan
| 5 |
EXHIBIT 1
PLAN
See attached.
| 6 |
Exhibit 10.140
AMENDED & RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This Amended and Restated Executive Employment Agreement (this “Agreement”) is made and entered into as of June 14, 2020 (the “Effective Date”) between TheMaven, Inc., a Delaware corporation (the “Company”) and Avi Zimak, an individual (the “Executive”).
RECITALS
WHEREAS, the Company desires to continue to employ the Executive as Chief Revenue Officer and Head of Global Strategic Partnerships, and the Executive desires to accept this offer of employment, effective as of the Effective Date.
WHEREAS, the Company and the Executive entered into an Executive Employment Agreement (“Initial Agreement”), dated November 2, 2019.
WHEREAS, on March 30, 2020 the Executive and the Company entered into a letter agreement providing that the Executives Annual Salary under the Initial Agreement would be reduced to $427,500 per annum effective April 1, 2020.
WHEREAS, on June 4, 2020 the Company notified the Executive that the Executive’s Annual Salary would be reduced to $363,375 per annum, effective from the Effective Date through December 31, 2020.
WHEREAS, the Company and the Executive have determined that the terms and conditions of this Agreement are reasonable and in their mutual best interests and accordingly desire to enter into this Agreement in order to provide for the terms and conditions upon which the Executive shall continue to be employed by the Company.
NOW THEREFORE, in consideration of the foregoing and the respective covenants, agreements and representations and warranties set forth herein, the parties to this Agreement, intending to be legally bound, agree as follows:
Article 1.
TERMS OF EMPLOYMENT
1.1. Employment and Acceptance.
(a). Employment and Acceptance. On and subject to the terms and conditions of this Agreement, the Company shall continue to employ the Executive and the Executive hereby accepts such employment. The Initial Agreement is terminated and fully superseded by this Agreement.
(b). Title: Executive shall have the title of: Chief Revenue Officer and Head of Global Strategic Partnerships.
(c). Responsibilities and Duties. The Executive’s duties shall consist of such duties and responsibilities as are consistent with the position of a Chief Revenue Officer and Head of Global Strategic Partnerships, including duties and responsibilities as are mutually determined from time to time by the Chief Executive Officer of the Company (the “CEO”) and the Executive.
(d). Reporting. The Executive shall report directly to the CEO.
(e). Performance of Duties; Travel. With respect to Executive’s duties hereunder, at all times, the Executive shall be subject to the reasonable instructions, control, and direction of the Board, and act in accordance with the Company’s Certificate of Incorporation, bylaws and other governing policies, rules and regulations (copies of which shall be provided to Executive), except to the extent that the Executive is aware that such documents conflict with applicable law. The Executive shall devote Executive’s business time, attention and ability to serving the Company on an exclusive and full-time basis as aforesaid and as the CEO may reasonably require, provided that the foregoing shall not prevent the Executive from (i) serving on the boards of non-profit organizations, upon advance written approval from the CEO or Chief Operating Officer (“COO”), which shall not be unreasonably withheld, or (ii) managing the Executive’s and Executive’s family’s passive personal investments, so long as such activities in the aggregate do not materially interfere or materially conflict with the Executive’s duties hereunder. The Executive will promptly disclose to the Company any conflicts or potential conflicts of interest, and may not perform any decision-making role in any activities in which such a conflict arises. The Executive shall also travel as reasonably required by Executive’s duties hereunder and shall comply with the Company’s then-current travel policies as approved by the CEO. During the term of this Agreement, Executive shall be entitled to business class travel for all air travel related to the performance of his services hereunder on the same basis as the CEO (but in all cases on air travel in excess of four hours in duration).
(f). Location. Executive shall be based primarily in the Company’s New York City office.
(g). Officer. The Executive shall, if requested, also serve as an officer of the Company or of any affiliate of the Company for no additional compensation.
1.2 Compensation and Benefits.
(a). Annual Salary. The Executive shall receive an annual salary of $363,375 with respect to that portion of calendar 2020 following the Effective Date, and thereafter $450,000 (such annual base salary, as such amount may be increased in accordance with this Agreement, the “Annual Salary”), which may not be decreased without the consent of the Executive. The Annual Salary shall be payable in accordance with the payment schedule as used by the Company for its senior-level Executives from time to time (but with pro-rata installments paid at least twice per calendar month), less such deductions as shall be required to be withheld by applicable law and regulation and consistent with the Company’s practices. The Annual Salary payable to the Executive will be reviewed, and may be increased, annually by the CEO.
(b). Bonus.
(i). For each calendar year during the Term starting with calendar year 2019, the Executive shall be eligible to earn an annual bonus (the “Annual Bonus”) based on a target amount (the “Base Bonus”) of $375,000 with respect to calendar year 2020 and $450,000 with respect to calendar years 2021 and beyond, such amount to be pro-rated for partial years. The Annual Bonus payable for any calendar shall equal the product of the applicable Base Bonus multiplied by a factor (the “Bonus Multiple”) determined as follows:
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(A). In the event that in any calendar year the Company achieves less than 60% of the Annual Revenue Target, the Bonus Multiple shall be 0%.
(B). In the event that in any calendar year the Company achieves 60% or more, but less than 100% of the Annual Revenue Target, the Bonus Multiple shall be is 30% + 1.75% x (% of Annual Revenue Target - 60%).
(C). In the event that in any calendar year the Company achieves 100% or more, but less than 150% of the Annual Revenue Target, the Bonus Multiple shall be 100% + 2.00% x (% of Annual Revenue Target - 100%).
(D). In the event that in any calendar year the Company achieves 150% or more of the Annual Revenue Target, the Bonus Multiple shall be 200%.
(ii). Bonus payments will be made quarterly (each a “Quarterly Payment”). Each Quarterly Payment will be based on the achievement in such quarter of a portion of the Annual Revenue Target then in effect (each such amount, the “Quarterly Revenue Marker”) as follows: (w) the Quarterly Revenue Marker for the first quarter of each calendar year shall equal 20% of the Annual Revenue Target, (x) the Quarterly Revenue Marker for the second quarter of each calendar year shall equal 20% of the Annual Revenue Target, (y) the Quarterly Revenue Marker for the third quarter of each calendar year shall equal 25% of the Annual Revenue Target and (z) the Quarterly Revenue Marker for the fourth quarter of each calendar year shall equal 35% of the Annual Revenue Target. The amount of each Quarterly Payment will be determined as follows:
(A). In the event that in any calendar quarter the Company achieves less than 60% of the applicable Quarterly Revenue Marker, no Quarterly Payment shall be payable.
(B). In the event that in any calendar quarter the Company achieves 60% or more of the applicable Quarterly Revenue Marker, the Quarterly Payment shall equal (1) 25% of the Base Bonus multiplied by (2) the lesser of (x) the portion of the Annual Revenue Target achieved in such quarter divided by the applicable Quarterly Revenue Marker and (y) one.
Each Quarterly Payment will be paid within one and a half months of the end of the applicable quarter, provided the Executive remains an employee in good standing with the Company as of the date of payment. Notwithstanding the foregoing, in the event Executive dies, becomes Permanently Incapacitated, is terminated without Cause or resigns for Good Reason, Executive shall be entitled to receive the Annual Bonus that would have been earned by the Executive had the Executive been employed with the Company as of the date of payment of such Annual Bonus for such calendar year, such amount to be pro-rated for partial years (including, for the avoidance of doubt, partial years by reason of such termination occurring prior to December 31 of such calendar year). In the event Executive dies, becomes Permanently Incapacitated, is terminated without Cause or resigns for Good Reason, any payment pursuant to this Section 1.2(b)(ii) is subject to the obligations set forth in Section 1.3(c)(iii). Notwithstanding the forgoing, the parties agree that no Quarterly Payment shall be made with respect to the first quarter of 2020.
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(iii). Within 60 days following the end of the applicable calendar year, the Company shall conduct a reconciliation (a “Reconciliation”) of the Quarterly Payments for such calendar year against the actual Annual Bonus earned for such year and provide the Executive with a breakdown in accordance with the notice provisions of the Agreement (“Reconciliation Notice”). It is specifically understood that if Executive’s employment ends prior to the end of the applicable year, the calculations the Annual Bonus under this Section 1.2(b)(iii) will be pro-rated based on the amount of time during such year for which the payment of such Annual Bonus was earned under Section 1.2(b)(ii).
(iv). In the event it is determined as a result of the Reconciliation that the sum of the Quarterly Payments was less than the actual Annual Bonus for the applicable calendar year, the Company will pay the difference to the Executive within 30 days following the sending of the Reconciliation Notice. In the event of an overpayment to the Executive, such overpayment shall be deducted from the subsequent Quarterly Payment (but such deduction shall not be reflected in the Reconciliation for such subsequent period).
(c). Stock Option Grant in Initial Agreement. In consideration of entering into the Initial Agreement, the Company granted to the Executive a ten-year option (the “Option”) to purchase up to an aggregate of 2,250,000 shares of the common stock (“Common Stock”) of the Company (the “Option Shares”) pursuant to the Company’s 2019 Equity Incentive Plan (the “Plan”). The Option shall be subject to the terms and conditions set forth in the Plan. The Option shall vest as follows:
(i). In accordance with the terms of the Plan, the portion of the Option to acquire 1,125,000 Option Shares (the “Performance Option”) of Common Stock will vest based on the performance targets set forth in paragraphs (A), (B) and (C) below:
(A). On December 31, 2020:
(1) In the event the Company achieves the Annual Revenue Target for 2020, the Performance Option with respect to 375,000 Option Shares shall vest;
(2) In the event the Company achieves 80% or more, but less than 100%, of the Annual Revenue Target for 2020, the Performance Option with respect to a number of Option Shares shall vest equal to the percentage of the Annual Revenue Target achieved multiplied by 375,000 shares; or
(3) In the event the Company achieves less than 80% the Annual Revenue Target for 2020, the Performance Option with respect to no Option Shares shall vest.
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(B). On December 31, 2021:
(1) In the event the Company achieves the Annual Revenue Target for 2021, the Performance Option with respect to 375,000 Option Shares shall vest;
(2) In the event the Company achieves 80% or more, but less than 100%, of the Annual Revenue Target for 2021, the Performance Option with respect to a number of Option Shares shall vest equal to the percentage of the Annual Revenue Target achieved multiplied by 375,000 shares; or
(3) In the event the Company achieves less than 80% the Annual Revenue Target for 2021, the Performance Option with respect to no Option Shares shall vest.
(C). On December 31, 2022:
(1) In the event the Company achieves the Annual Revenue Target for 2022, the Performance Option with respect to 375,000 Option Shares shall vest;
(2) In the event the Company achieves 80% or more, but less than 100%, of the Annual Revenue Target for 2022, the Performance Option with respect to a number of Option Shares shall vest equal to the percentage of the Annual Revenue Target achieved multiplied by 375,000 shares; or
(3) In the event the Company achieves less than 80% the Annual Revenue Target for 2022, the Performance Option with respect to no Option Shares shall vest.
(ii). In accordance with the terms of the Plan, the portion of the Option to acquire 1,125,000 Option Shares (the “Time Option”) is subject, among other restrictions set forth in the Plan, to monthly vesting over 36 months commencing from the Effective Date of the Initial Agreement, with 1/3 vesting after 12 months, and 1/36th vesting at the end of each month thereafter and concluding 36 months from the Effective Date, and to the Company’s right to cancel a portion the Time Options as described in the Plan.
(iii). In connection with the Options:
(A). The parties agree that the Executive’s services under the Initial Agreement and his services hereunder shall be deemed to constitute continuous service for the purposes of the vesting of the Option.
(B). The Executive acknowledges that as of the date of this Agreement, the Option Shares are not authorized and available for issuance, therefore the Options are considered to be unfunded options. The Executive agrees that no portion of the Option may be exercised except in accordance with the vesting conditions and exercise dates set forth in this Agreement. The Company agrees to timely increase the authorized shares of common stock of the Company in sufficient number of shares to permit the exercise from time to time of the Option in accordance with the vesting conditions and exercise dates set forth in this Agreement.
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(C). If the majority of C-level executives are provided additional Common Stock, options or other equity incentives by the board of directors as part of an incentive plan or otherwise, the Executive will participate in such grants or incentive plan on the same terms and conditions and on a pro-rata basis, compared to the average increase in shares for other adjacent C-level executives (not including the CEO). Notwithstanding the forgoing, the Executive will not be eligible to participate in grants or incentives to the extent awarded to other personnel to address dilution resulting from or in connection with the acquisition by the Company of TheStreet, Inc. or the entry by the Company into that certain Licensing Agreement dated as of June 14, 2019 between the Company and ABG-SI LLC.
(d). Restricted Stock Unit Award. As consideration for entering into the Initial Agreement, the Company awarded the Executive restricted stock units (the “RSU Grant”) for 250,000 shares of Common Stock (the “RSU Shares”). The RSU Grant shall vest on the first anniversary of the Effective Date of the Initial Agreement, so long as the Executive is continuously employed by the Company or any affiliate thereof, and the underlying RSU Shares shall be delivered to Executive upon the earlier to occur of (i) the 5th anniversary of the date of the Initial Agreement and (ii) the date of any change of control transaction of the Company. The Executive acknowledges that at the time of the RSU Grant the RSU Shares are not authorized and available for issuance, therefore the RSU Grant is considered to be unfunded. The Executive agrees that no part of RSU Grant may vest except in accordance with the vesting conditions and exercise date set forth in this Agreement. The Company agrees to timely increase the authorized shares of common stock of the Company in sufficient number of shares to permit the exercise of the RSU Grant in accordance with the vesting conditions and exercise date set forth in this Agreement. Notwithstanding the foregoing, if the Executive dies, becomes Permanently Incapacitated, resigns for Good Reason or is terminated without Cause prior to the first anniversary of the Effective Date of the Initial Agreement, the RSU Grant shall automatically vest and the underlying RSU Shares shall be delivered to Executive upon the earlier to occur of (i) the 5th anniversary of the date of this Agreement and (ii) the date of any change of control transaction of the Company.
(e). Signing Bonus. As consideration for entering into the Initial Agreement, the Company paid to the Executive a one-time signing bonus (the “Signing Bonus”) in the amount of $250,000 (less such withholdings and deductions as required by applicable law and regulation and consistent with the Company’s practices). In the event the Executive is terminated for Cause (as defined in this Agreement) or resigns other than for Good Reason (as defined in this Agreement) on or before the second anniversary of the Effective Date, the Executive shall be obligated to repay to the Company the Signing Bonus within 14 days of the Executive’s last day of employment. Moreover, unless there is a good faith dispute between Executive and the Company as to whether Executive is required to repay the Signing Bonus in accordance with the immediately preceding sentence, in the event the Company is required to initiate legal proceedings to recoup the Signing Bonus, the Executive shall reimburse the Company for all attorneys’ fees and legal costs associated with recouping the Signing Bonus. For purposes of clarity, if the Executive dies, becomes Permanently Incapacitated, resigns for Good Reason or is terminated without Cause, the Executive shall not be required to repay the Signing Bonus.
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(f). Expenses. The Executive shall be reimbursed for all ordinary and necessary out-of-pocket business expenses reasonably and actually incurred or paid by the Executive in the performance of the Executive’s duties in accordance with the Company’s policies applicable to executives of like seniority, and in the case of travel and accommodation expenses, applicable to the CEO and President of the Company (but subject to the specific approval of the CEO or the President of the Company in each instance) upon presentation of such expense statements or vouchers or such other supporting information as the Company may require.
(g). Benefits. The Executive shall be entitled to fully participate in all benefit plans that are in place and available to the CEO and President of the Company from time to time, including, without limitation, medical, dental, vision and life insurance (if offered), in each case subject to the general eligibility, participation and other provisions set forth in such plans. Without limiting the foregoing, with respect to Executive’s services, the Company shall indemnify Executive to the maximum extent set forth in the organizational documents of the Company and Executive shall be covered on a Company directors and officers errors and omissions insurance policy to the same extent that any other person is so covered.
(h). Paid Time Off. The Executive shall be entitled to paid time off based on the Company’s policies applicable to other C-level executives in effect from time to time, provided such duration shall not be less than four weeks annually.
(i). Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement.
1.3 Term; Termination of Employment.
(a). Term. The Executive’s initial term of employment hereunder shall begin on the Effective Date, and, unless earlier terminated pursuant to Sections 1.3(b) or 1.3(c), shall continue until the second anniversary of the Effective Date of the Initial Agreement (the “Initial Term”), and, if not so earlier terminated, shall be automatically renewed for additional one (1) year terms (each a “Renewal Term”, and together with the Initial Term, the “Term”) thereafter unless written notice to the contrary is provided by either party to the other at least ninety (90) days prior to the expiration of the Initial Term or then-existing Renewal Term, as applicable.
(b). Early Termination. The term of this Agreement may be earlier terminated by the Executive or the Company as follows:
(i). Termination for Cause. The Company may terminate the Executive’s employment at any time for Cause upon written notice to the Executive setting forth the termination date and, in reasonable detail, the circumstances claimed to provide a basis for termination pursuant to this Section 1.3(b)(i), without any requirement of a notice period and without payment of any compensation of any nature or kind; provided, however, that if the Cause is pursuant to subsections (i), (ii), (vi) or (vii) of the definition of Cause (appearing below), the Chief Executive Officer must give the Executive the written notice referenced above within (30) days of the date that the Chief Executive becomes aware or has knowledge of, or reasonably should have become aware or had knowledge of, such act or omission, and the Executive will have thirty (30) days to cure such act or omission. Upon payment of the amounts set forth in Section 1.3(d), the Executive shall not be entitled to any benefits or payments (other than those required under Section 1.3(d) hereof), including any payment under the terms of the Plan.
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(ii). Termination without Cause. The Company may terminate the Executive’s employment at any time without Cause upon written notice to the Executive, subject to Section 1.3(c) and 1.3(d).
(iii). Permanent Incapacity. In the event of the “Permanent Incapacity” of the Executive (which shall mean by reason of illness or disease or accidental bodily injury, the Executive is so disabled that the Executive is unable to ever work again), the Executive may thereupon be terminated by the Company upon written notice to the Executive without payment of any severance of any nature or kind (including, without limitation, by way of anticipated earnings, damages or payment in lieu of notice); provided that, in the event of the Executive’s termination pursuant to this Subsection 1.3(b)(iii), the Company shall pay or cause to be paid to the Executive (i) the amounts specified in Section 1.2(b), provided that the Executive signs and does not revoke the release agreement referred to in Section 1.3(c)(iii), and amounts prescribed by Section 1.3(d) below through the date of Permanent Incapacity, and (ii) the amounts specified in any benefit and insurance plans applicable to the Executive as being payable in the event of the permanent incapacity or disability of the Executive, such sums to be paid in accordance with the provisions of those plans as then in effect.
(iv). Death. If the Executive’s employment is terminated by reason of the Executive’s death, the Executive’s beneficiaries or estate will be entitled to receive and the Company shall pay or cause to be paid to them or it, as the case may be, (i) the amounts specified in Section 1.2(b), provided that the Executive signs and does not revoke the release agreement referred to in Section 1.3(c)(iii), and amounts prescribed by Section 1.3(d) through the date of death, and (ii) the amounts specified in any benefit and insurance plans applicable to the Executive as being payable in the event of the death of the Executive, such sums to be paid in accordance with the provisions of those plans as then in effect.
(v). Termination by Executive. The Executive may terminate employment with the Company upon giving 30 days’ written notice or such shorter period of notice as the Company may accept. The Executive may resign for Good Reason subject to Section 1.3(c) and 1.3(d). If the Executive resigns for any reason not constituting Good Reason, the Executive shall not be entitled to any severance or other benefits (other than those required under Section 1.3(d)).
(c). Termination without Cause or by the Executive for Good Reason. If the Executive’s employment with the Company is terminated prior to the end of the Term, by the Company without Cause or by the Executive for Good Reason, then the Executive shall receive the payments and benefits described in this Section 1.3(c).
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(i). Executive shall be entitled to (i) any amounts owed to the Executive pursuant Section 1.3(d), (ii) if Executive dies, becomes Permanently Incapacitated, is terminated for Cause or resigns for Good Reason prior to the first anniversary of the Effective Date, the RSU Grant and RSU Shares in accordance with Section 1.2(d), (iii) any amount owed pursuant to Section 1.2; (iv) if such termination occurs during the Initial Term, to receive salary continuation (i.e., not a lump sum payment) through the longer of (x) the end of the Initial Term and (y) one year following the Executive’s date of termination (the “Termination Date”), and (v) if such termination occurs during a Renewal Term, to receive salary continuation (i.e., not a lump sum payment) for a period of one year following the Termination Date. The period through which severance is paid pursuant to subclause (iv) or subclause (v) to the Executive hereunder is referred to herein as the “Severance Period”. Payments described in subclause (iv) or subclause (v) hereunder shall commence to be paid on the 60th day following the Termination Date, provided that the first payment shall include all of the payments which should have been paid prior to such date, but were not paid as a result of this sentence.
(ii). If the Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s healthcare plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall directly pay, or reimburse the Executive, a portion of the COBRA premiums (based on the amount paid by the Company immediately prior to the Executive’s Termination Date) for the Executive and the Executive’s covered dependents under such plans during the period commencing on the Termination Date and ending upon the earliest of (X) the expiration of the Severance Period, (Y) the date that the Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (Z) the date the Executive becomes eligible to receive healthcare coverage from a subsequent employer (and the Executive agrees to promptly notify the Company of such eligibility). Notwithstanding the foregoing, if the Company cannot provide the foregoing COBRA premiums without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that the Executive would be required to pay to continue Executive’s and Executive’s covered dependents’ group health coverage in effect on the Termination Date (which amount shall equal the amount paid by the Company immediately prior to the Executive’s Termination Date), less the amount Executive would have had to pay to receive group health coverage for Executive and Executive’s covered dependents based on the cost sharing levels in effect on the Termination Date, which payments shall be made regardless of whether the Executive elects COBRA continuation coverage and shall commence in the month following the month in which the Termination Date occurs and shall end on the earlier of (X) the expiration of the Severance Period, (Y) the date that the Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (Z) the date the Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility).
(iii). The payments and benefits described in Section 1.3(c)(i) and Section 1.3(c)(ii), along with the vesting features of the Executive’s equity awards as set forth in this Agreement, are the only severance, benefits or other payments in lieu of notice that the Executive will be entitled to receive under this Agreement. Any right of the Executive (or the Executive’s estate) to payments and benefits pursuant to Section 1.3(c)(i) and Section 1.3(c)(ii) shall be contingent on Executive (or an authorized representative of Executive’s estate) signing and not revoking a standard form of release agreement with the Company in the form attached hereto as Exhibit A (as such form may be modified solely to the extent required to conform to applicable laws).
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(d). Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to any of the circumstances listed in Section 1.3(b), Executive (or Executive’s estate) shall be entitled to receive: (i) the portion of Executive’s Annual Salary earned through the date of termination, but not yet paid to Executive, (ii) any vacation time that has been accrued but unused to the extent consistent with Company policy, (iii) any expense reimbursements owed to Executive pursuant to this Agreement, and (iv) any amount accrued and arising from Executive’s participation in, or benefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.
(e). Statutory Deductions. All payments required to be made to the Executive, his beneficiaries, or his estate under this Section shall be made net of all deductions required to be withheld by applicable law and regulation. The Executive shall be solely responsible for the satisfaction of any taxes (including employment taxes imposed on employees and taxes on nonqualified deferred compensation). Although the Company intends and expects that the Plan and its payments and benefits will not give rise to taxes imposed under Code Section 409A, unless the Company is in breach of its obligations hereunder or applicable law with respect to taxes imposed under Code Section 409A, neither the Company nor its employees, directors, or their agents shall have any obligation to hold the Executive harmless from any or all of such taxes or associated interest or penalties.
(f). Fair and Reasonable, etc. The parties acknowledge and agree that the payment provisions contained in this Section are fair and reasonable, and the Executive acknowledges and agrees that such payments are inclusive of any notice or pay in lieu of notice or vacation or severance pay to which he would otherwise be entitled under statute, pursuant to common law or otherwise in the event that his employment is terminated pursuant to or as contemplated in this Section 1.3.
1.4 Restrictive Covenants.
(a). Non-Solicitation of Employees. During the Executive’s employment and for a period of one year following the termination of the Executive’s employment with the Company for any reason, the Executive agrees and covenants not to directly or indirectly, alone or in concert with others, solicit, encourage, influence, recruit, or induce or attempt to solicit, encourage, influence, recruit or induce, or direct any other person or entity to take any of the aforementioned actions, any employee of the Company to cease working for the Company and/or to begin working with any other person or entity. This non-solicitation provision explicitly covers all forms of oral, written, or electronic communication, including, but not limited to, communications by email, regular mail, express mail, telephone, fax, instant message, and social media, including, but not limited to, Facebook, LinkedIn, Instagram, and Twitter, and any other social media platform, whether or not in existence at the time of entering into this Agreement.
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Notwithstanding the foregoing, this Section shall not deemed to have been breached or violated by the placement of general advertisements that may be targeted to a particular geographic or technical area but that are not specifically targeted toward employees of the Company.
(b). Non-Solicitation of Customers. The Company has a legitimate business interest in protecting its substantial and ongoing customer relationships. The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, the Executive will have access to and learn about much or all of the Company’s customer information. “Customer Information” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to customer sales and the provision to customers of services.
The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.
In exchange for the Executive’s employment by the Company, and based on the Executive’s access to Customer Information during the Executive’s employment and/or after the termination of the Executive’s employment with the Company for any reason, the Executive agrees and covenants that, during the Executive’s employment and for a period of one year following the termination of the Executive’s employment with the Company for any reason, the Executive will not directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, instant message, or social media, including but not limited to Facebook, LinkedIn, Instagram or Twitter, or any other social media platform, whether or not in existence at the time of entering into this Agreement), attempt to contact, or meet with the Company’s customers or prospective customers as described below for purposes of offering or accepting goods or services competitive with those offered by the Company.
This restriction shall only apply to:
(i). Customers the Executive contacted in any way during the past 12 months;
(ii). Customers about whom the Executive has trade secret or confidential information;
(iii). Customers who became customers during the Executive’s employment with the Company;
(iv). Customers about whom the Executive has information that is not available publicly; and
(v). Prospective customers with whom the Executive is engaged in active sales communications or with whom the Executive is aware that the Company is otherwise engaged in active sales communications.
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(c). Confidential Information; Proprietary Rights. The Executive has had and shall continue to have access to the trade secrets, business plans, and production processes of the Company. Accordingly, the Executive shall comply with and shall remain subject to the terms of the Employee Confidentiality and Proprietary Rights Agreement, dated on or about the date of the Initial Agreement (“Confidentiality Agreement”), whose terms are fully incorporated by reference into this Agreement.
(d). Acknowledgment by the Executive. The Executive acknowledges and confirms that: (i) the restrictive covenants contained in this Section 1.4 are reasonably necessary to protect the legitimate business interests of the Company; (ii) the restrictions contained in this Section 1.4 (including, without limitation, the length of the term of the provisions of this Section 1.4) are not overbroad, overlong, or unfair and are not the result of overreaching, duress, or coercion of any kind; and (iii) the Executive’s entry into this Agreement and, specifically this Section 1.4, is a material inducement and required condition to the Company’s entry into this Agreement.
(e). Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of this Section 1.4 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 1.4 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(f). Survival. The provisions of this Section 1.4 shall survive the termination of this Agreement.
(g). Injunction. It is recognized and hereby acknowledged by the parties hereto that a breach by the Executive of any of the covenants contained in this Section 1.4 will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive recognizes and hereby acknowledges that the Company shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in this Section 1.4 by the Executive or any of Executive’s Affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.
1.5 Definitions. The following capitalized terms used herein shall have the following meanings:
(a). “Affiliate” shall mean, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by or under common control with such Person.
(b). “Agreement” shall mean this Agreement, as amended from time to time.
(c). “Annual Revenue Target” shall mean, in respect of any calendar year, an amount, as determined by the Board or the Compensation Committee of the Board, as it may be adjusted from time to time to take into account material strategic developments in the Company’s business, such as the acquisition of new businesses or the effects of market-wide conditions outside the Company’s control, and as in effect on the last day of such calendar year, comprising an aggregate of the Company’s annual revenue with respect to the following revenue streams:
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(i). Sponsorship revenue for directly sold print and digital display advertising;
(ii). Programmatic private marketplace revenue (“PMP”) and programmatic guaranteed (“PG”) display revenue, but not open market display revenue; and
(iii). All digital video revenue, including open market, directly sold, PMP and PG.
(d). “Annual Salary” shall have the meaning specified in Section 1.2(a).
(e). “Board” shall mean the Board of Directors of the Company.
(f). “Cause” means the (i) Executive’s willful and continued failure substantially to perform the duties of the Executive under this Agreement (other than any such failure resulting from incapacity due to physical or mental illness), provided that the mere failure to achieve specified objectives shall not constitute Cause; (ii) the Executive’s willful and continued failure to comply with any valid and legal directive of the Chief Executive Officer in accordance with this Agreement, provided that the mere failure to achieve specified objectives shall not constitute Cause; (iii) the Executive’s engagement in illegal conduct or willful misconduct, which is, in each case, materially and demonstrably injurious to the Company or its Affiliates; (iv) the Executive’s embezzlement, misappropriation, or fraud against the Company or any of its Affiliates; (v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent), if such felony is work-related, materially impairs the Executive’s ability to perform services for the Company, or results in a material loss to the Company or material damage to the reputation of the Company; (vi) the Executive’s failure to comply in any material respect with a material policy of the Company that has been previously delivered to the Executive in writing if such failure causes material harm to the Company; or (vii) the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company. No act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.
(g). “Code” shall have the meaning of the Internal Revenue Code of 1986, as it may be amended from time to time.
(h). “Company” shall have the meaning specified in the introductory paragraph hereof; provided that, (i) “Company” shall include any successor to the Company and (ii) for purposes of Section 1.4, the term “Company” also shall include any existing or future subsidiaries of the Company that are operating during the Term of this Agreement.
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(i). “Good Reason” shall mean any of the following events, which has not been either consented to in advance by the Executive in writing or, with respect only to subsections (ii), or (v) below, cured by the Company within a reasonable period of time, not to exceed 30 days, after the Executive provides written notice within 30 days of the initial existence of (or, if later, the Executive’s knowledge of the existence of) one or more of the following events: (i) a decrease in the Annual Salary; (ii) a material breach of this Agreement, or any other written agreement between the Executive and the Company, by the Company; (iii) a material diminution or reduction in the Executive’s responsibilities, duties or authority; (iv) requiring the Executive to take any action which would violate any federal or state law; or (v) any requirement that the Executive’s duties be performed more than 50 miles outside of New York City more than two (2) days per week on average, (it being understood that certain weeks will require lengthier stays outside of New York City). Good Reason shall not exist unless the Executive terminates his employment within seventy-five (75) days following the initial existence of (or, if later, the Executive’s knowledge of the existence of) the condition or conditions that the Company has failed to cure, if applicable.
(j). “Person” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.
Article 2.
MISCELLANEOUS PROVISIONS
2.1 Further Assurances. Each of the parties hereto shall execute and cause to be delivered to the other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.
2.2 Notices. All notices hereunder shall be in writing and shall be sent by (a) certified or registered mail, return receipt requested, (b) national prepaid overnight delivery service, (c) electronic transmission (following with hard copies to be sent by prepaid overnight delivery Service) or (d) personal delivery with receipt acknowledged in writing. All notices shall be addressed to the parties hereto at their respective addresses as set forth below (except that any party hereto may from time to time upon fifteen days’ written notice change its address for that purpose), and shall be effective on the date when actually received or refused by the party to whom the same is directed (except to the extent sent by registered or certified mail, in which event such notice shall be deemed given on the third day after mailing).
(a). If to the Company:
TheMaven, Inc.
1500 Fourth Avenue, Suite 200
Seattle, WA 98101
Email: hr@maven.io
(b). If to the Executive:
Avi Zimak
392 River Road
Chatham, NJ 07928
Email: avizimak@gmail.com
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2.3 Headings. The underlined or boldfaced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
2.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.
2.5 Governing Law; Jurisdiction and Venue.
(a). This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of New York (without giving effect to principles of conflicts of laws), except to the extent preempted by federal law.
(b). Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement shall be brought or otherwise commenced exclusively in any state or federal court located in New York County, New York.
2.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns (if any). The Company will use commercially reasonable efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. The Executive shall not assign this Agreement or any of the Executive’s rights or obligations hereunder (by operation of law or otherwise) to any Person without the consent of the Company.
2.7 Remedies Cumulative; Specific Performance. The rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other party to this Agreement, such other party shall be entitled (in addition to any other remedy that may be available to it) to (a) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (b) an injunction restraining such breach or threatened breach. The parties to this Agreement further agree that in the event the Executive prevails on any material claim (in a final adjudication) in any legal proceeding brought against the Company to enforce the Executive’s rights under this Agreement, the Company will reimburse the Executive for the reasonable legal fees incurred by the Executive in connection with such proceeding.
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2.8 Waiver. No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of statutory claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
2.9 Code Section 409A Compliance. To the extent amounts or benefits that become payable under this Agreement on account of the Executive’s termination of employment (other than by reason of the Executive’s death) constitute a distribution under a “nonqualified deferred compensation plan” within the meaning of Code Section 409A (“Deferred Compensation”), the Executive’s termination of employment shall be deemed to occur on the date that the Executive incurs a “separation from Service” with the Company within the meaning of Treasury Regulation Section 1.409A-1(h). If at the time of the Executive’s separation from service, the Executive is a “specified Executive” (within the meaning of Code Section 409A and Treasury Regulation Section 1.409A-1(i)), the payment of such Deferred Compensation shall commence on the first business day of the seventh month following the Executive’s separation from Service and the Company shall then pay the Executive, without interest, all such Deferred Compensation that would have otherwise been paid under this Agreement during the first six months following the Executive’s separation from service had the Executive not been a specified Executive. Thereafter, the Company shall pay Executive any remaining unpaid Deferred Compensation in accordance with this Agreement as if there had not been a six-month delay imposed by this paragraph. If any expense reimbursement by the Executive under this Agreement is determined to be Deferred Compensation, then the reimbursement shall be made to the Executive as soon as practicable after submission for the reimbursement, but no later than December 31 of the year following the year during which such expense was incurred. Any reimbursement amount provided in one year shall not affect the amount eligible for reimbursement in another year and the right to such reimbursement shall not be subject to liquidation or exchange for another benefit. In addition, if any provision of this Agreement would subject the Executive to any additional tax or interest under Code Section 409A, then the Company shall, subject to the Executive’s consent (such consent not be unreasonably withheld, conditioned or delayed), reform such provision; provided that the Company shall (x) maintain, to the maximum extent practicable, the original intent of the applicable provision without subjecting the Executive to such additional tax or interest and (y) not incur any additional compensation expense as a result of such reformation. For purposes of Code Section 409A, Executive’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
2.10 Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of all of the parties hereto.
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2.11 Severability. In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law,
2.12 Parties in Interest. Except as provided herein, none of the provisions of this Agreement are intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any).
2.13 Public Announcements. Neither the Company nor Executive shall issue any press release or similar public announcement regarding this Agreement or Executive’s employment with the Company without the consent of the other party (such consent not to be unreasonably withheld, conditioned or delayed).
2.14 Entire Agreement. This Agreement and its Exhibits, and the Confidentiality Agreement, set forth the entire understanding of the parties hereto relating to the subject matter hereof and supersedes all prior agreements, term sheets and understandings between the parties relating to the subject matter hereof.
[SIGNATURE PAGE TO EXECUTIVE
EMPLOYMENT AGREEMENT TO FOLLOW]
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[SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT]
The parties hereto have caused this Agreement to be executed and delivered as of the date first set forth above.
| THE COMPANY: |
| THEMAVEN, INC. |
| By: | ||
| Name: | ||
| Title: |
| THE EXECUTIVE: |
| Avi Zimak |
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EXHIBIT A
SEPARATE AGREEMENT AND RELEASE
Attached.
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Exhibit 10.141
Exhibit 10.142
Confidential
Separation Agreement and General Release
This Confidential Separation Agreement and General Release (the “Agreement”) is entered into by and between TheMaven, Inc. (the “Employer”) on behalf of itself, its subsidiaries, and other corporate affiliates (including, but not limited to, Maven Coalition, Inc.) and each of their respective present and former employees, officers, directors, owners, shareholders, and agents, individually and in their official capacities (collectively referred to as the “Employer Group”), and Andrew Kraft (“you” (the Employer and you are collectively referred to as the “Parties”).
1. Separation Date. Your last day of employment with the Employer shall be April 10, 2020 (the “Separation Date”). If the Employer receives a signed Agreement before the Separation Date, the Employer shall consider that signed Agreement to be void.
2. Consideration. Subject to the terms of this Agreement and your continued compliance with your obligations hereunder, including, but not limited to, your obligations under paragraphs 3 and 4 of this Agreement:
a. Severance Payment. The Employer shall pay you the gross amount of $150,000 (less all withholdings and other applicable deductions) (“Severance Payment”). The Severance Payment shall be paid within 14 days of the Employer’s first regularly scheduled payroll date following the Effective Date, as defined below in Section 7(d). You acknowledge that the Severance Payment exceeds any eligibility you would have to the combined amount of severance and outstanding bonuses under the Amended & Restated Executive Employment Agreement between you and the Employer, dated as of January 1, 2020 (“EEA”) (a copy of the EEA is attached), including, but not limited to, the severance described in Section 1.3(c) of the EEA and the bonuses described in Section 1.2(b) of the EEA.
b. COBRA Payments. To the extent that you timely elect under COBRA to continue your medical, dental and/or vision insurance through the Employer’s policies, the Employer will contribute a portion of the premium due with respect to the coverage for a period of six (6) months following the Effective Date (as defined in paragraph 6(d)) in an amount equal to the portion of the premium that the Employer would have contributed had you remained an employee (“COBRA Payments”). You acknowledge and agree that the Employer’s obligation to pay the COBRA Payments shall cease in the event you become eligible for other group health insurance coverage or become ineligible to receive COBRA continuation coverage. Should such contribution by Employer be determined by an applicable governmental authority to be taxable income to you, Employer shall pay you an amount equal to 35% of such taxable income amount upon completion of the last COBRA Payment in order to cover taxes thereon.
c. Options Vesting and Exercise of Options. As of the Effective Date, you shall: (i) be vested in a total of 750,000 shares of the Time Options referenced in Section 1.2(c)(i) of the EEA; (ii) be vested in a total of 400,000 shares of the Performance Options referenced in Section 1.2(c)(i) of the EEA; and (iii) be permitted to exercise those vested Time Options, vested Performance Options and any Stock Price Target Options, as referenced in Section 1.2(c)(ii) of the EEA, which may vest in accordance with theirs terms, within thirty (30) days following the later of: (A) December 1, 2020; or (B) after the date that the underlying shares are created and that you have been informed of their creation in writing, with such notice to be given within fifteen (15) days of the creation of the underlying shares (collectively, the benefits referenced in this paragraph 2(c) shall be referred to as the “Option Extension”). The exercise of the Options may at your discretion, be a “cashless” transaction, where enough shares are sold at the time of the exercise to pay for the remaining shares and associated taxes, should taxes be due at time of the transaction. You acknowledge that other than the vested Time Options, vested Performance Options and vesting Stock Price Target Options described in this paragraph 2(c), the remainder of your Time Options, Performance Options and those Stock Price Target Options that cannot vest by reason of the Time Vesting Overlay (as defined in the Stock Price Target Options), are unvested and extinguished upon your termination of employment, and all the vested options will be treated (for tax purposes) as nonqualified stock options.
3. Post-Employment Obligations.
a. You shall not disclose any of the negotiations of, terms of, or amount paid under this Agreement to any individual or entity; provided, however, that you will not be prohibited from making disclosures to your spouse or domestic partner, attorney, tax advisors, or as may be required by law. This does not prevent you from disclosing the existence of this Agreement to any party, including a prospective employer, nor does it prevent you from disclosing that you may not take an action which may be requested by such a party because such action may violate the Agreement.
b. You shall remain subject to and shall comply with the terms of the Employee Confidentiality and Proprietary Rights Agreement (“Confidentiality Agreement”) between you and the Employer, a copy of which is attached to this Agreement.
c. You shall remain subject to and shall comply with the terms of Section 1.4 of the EEA.
d. During the six-month period following the Effective Date, unless you obtain the prior, express, written consent of the President or COO of the Employer with respect to each communication, you shall not engage in any news interviews or expressions of personal views, opinions or judgments to the news media (whether print, electronic, social media, internet-related, blogs or broadcast) or to any other person or entity with respect to any facts, circumstances or claims associated with the Employer Group or any Released Party, your employment with the Employer, and the circumstances that led to the end of your employment with the Employer, except in each case in a manner that would reasonably be regarded as positive and beneficial to the reputations of you, the Employer Group and any Released Party affected. Nothing in this paragraph shall be deemed to prohibit you from discussing your job responsibilities for the Employer in a job interview for prospective future employment after the Separation Date or as otherwise permitted under paragraph 3(a) above. Both you and Employer will use reasonable efforts to describe your termination in the following manner:
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| (i) | That you agreed to change your role as Chief Revenue Officer to interim Chief Operating Officer to specifically oversee the Sports Illustrated and TheStreet integrations; | |
| (ii) | That after the integrations were complete, there was no role of appropriate responsibility that was available and of interest to you; and | |
| (iii) | Accordingly, and notwithstanding the manner in which your separation from employment may be described elsewhere in this Agreement, the Parties agree that you resigned for Good Reason (as such term is defined in the EEA) and that you and Employer parted on positive terms. |
e. For the six-month period following the Effective Date, you shall not, without the prior, express, written consent of the President or COO of the Employer, engage in any communications concerning Employer Group:
(i) with any employee, attorney or agent of Authentic Brands Group (collectively, “ABG”) except as set forth in paragraph 3(d) above. Any in-bound communications from ABG to you concerning Employer Group shall be promptly forwarded directly to the President and the COO of the Employer; or
(ii) with any Board member of the Employer Group in a manner which my reasonably be expected to in any way interfere with the Employer Group’s business.
Nothing in paragraphs 3(d) or 3(e) shall prohibit you from: (x) engaging in communications with individuals associated with ABG or Maven that do not relate to the Employer Group, ABG or Employer Group’s business; or (y) making statements to individuals associated with ABG or Maven that have been previously approved in writing by the President or COO of the Employer. The mere fact of your communicating with ABG at the request of a future employer with respect to business dealings between such employer and ABG shall not be deemed to be a violation of paragraphs 3(d) or 3(e).
f. For the six-month period following the Effective Date, you shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any customer, partner, employee or service provider of the Employer Group with whom you worked with or had access to confidential information during the course of your employment at Employer: (a) to cease or reduce doing business with any member of the Employer Group; or (b) to interfere in any way with the relationship between any member of the Employer Group and that customer, partner, employee or service provider. Nothing shall prevent you from working with such customers, partners, or employees, nor shall you be responsible should such customers, partners, or employees independently terminate their relationship with the Employer Group. In the case of employees of the Employer, an inbound request to you for a new position or a response to a publicly-posted advertisement for employment at your future employer shall not be considered a violation of this paragraph 3(f). Any sales or solicitation you make on your own behalf or on behalf of a new agency, to agencies, advertisers, ad tech companies, and partners are not a violation of this paragraph 3(f) providing that you do not also suggest or imply that said agency, advertiser, ad tech company, or partner ceases to work with Employer.
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g. Neither Party shall make any statements, orally or in writing, regardless of whether such statements are truthful, nor take any actions, which: (i) in any way could disparage you or any of the Released Parties, or which foreseeably could harm the good name, reputation and/or goodwill of you or any of the Released Parties; or (ii) in any way, directly or indirectly, could knowingly cause or encourage or condone the making of such statements or the taking of such actions by anyone.
h. You shall reasonably cooperate with and assist the Employer Group in connection with any litigation, dispute or proceeding in which the Employer Group is involved which involves or arises out of your employment by Employer may require your cooperation and assistance. Such cooperation shall be provided at a time and in a manner which is mutually agreeable to you and the Employer Group, and shall include providing information, documents, etc., submitting to depositions, providing testimony and assisting the Employer Group generally in defending its position with reference to any matter with which you were involved during your employment. The Employer Group shall: (i) seek to minimize interruptions to your schedule to the extent practicable; and (ii) reimburse you in accordance with its expense reimbursement policy for any reasonable out-of-pocket expense you incur in fulfilling your obligations under this Agreement. You shall promptly notify the Employer Group if you are contacted by lawyers or third parties regarding employment-related litigation or other Claims against the Employer Group.
i. In further consideration for the consideration set forth in paragraph 2, you shall be available to the Employer as reasonably requested in advance by the Employer on an as-needed basis to aid in the transition of your duties and to consult with the Employer by telephone or e-mail about matters that are within your expertise and relate to your employment with the Employer. You shall have no authority to speak on behalf of, or to bind, the Employer, and shall not purport to have such authority, nor will you be authorized to direct work of other employees of the Employer or to work on the Employer’s business without the written consent of Bill Sornsin or Paul Edmondson. Specifically, you may be contacted by Bill Sornsin or Paul Edmondson (or others at either Sornsin’s or Edmondson’s written instruction including James Heckman, Avi Zimak and Ross Levinsohn) to aid in Venture Integration related to the Sports Illustrated IT transition, the JW Player video transaction, and LiftIgniter.
j. You waive any right you may have to continued or reinstated employment of any kind or nature with the Employer Group and to apply for or accept employment with the Employer Group.
k. You warrant and represent that you have returned all Employer Group property, including identification cards or badges, access codes or devices, keys, laptops, computers, telephones, mobile phones, hand-held electronic devices, credit cards, electronically stored documents or files, physical files, and any other Employer Group property in your possession.
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l. Nothing in this Agreement shall preclude you from: (i) making disclosures that are otherwise prohibited by this Agreement in order to enforce this Agreement or in response to any lawful court order, deposition request or subpoena, or in connection with an investigation by a governmental or law enforcement agency; (ii) initiating, testifying, assisting, complying with a subpoena from, or participating in any manner with an investigation conducted by a local, state or federal agency; (iii) filing or disclosing facts necessary to receive unemployment insurance, Medicaid or other public benefits to which you may be entitled; (iv) making disclosures that are otherwise prohibited by this Agreement to law enforcement, the Equal Employment Opportunity Commission, the state Division of Human Rights, a local commission on human rights, or an attorney retained by you; or (v) reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation.
4. Acknowledgments.
a. You acknowledge that you waive and are not eligible for any severance, bonuses or post-employment payments other than those set forth in this Agreement, including, but not limited to, those bonuses set forth in Section 1.2(b) of the EEA and those post-employment severance payments set forth in Section 1.3(c) of the EEA.
b. You acknowledge that the Option Extension constitutes substantial consideration because it provides you with additional vested options to which you would not otherwise be eligible and an extension to the deadline to exercise those options. You further acknowledge that, in the absence of the Option Extension, you would be required to exercise your vested options within 30 days of the Separation Date and that the relevant shares will not be available within that time period. The Option Extension is therefore consideration for release of any claims regarding the status of such shares being still unavailable over a year past the date of employment.
c. You acknowledge that the Option Extension may cause you to forfeit incentive stock option status for tax purposes, but that the value associated with the Option Extension exceeds any potential loss of incentive stock option status.
d. You acknowledge that the terms of this Agreement and the agreement between the parties regarding the end of your employment with the Employer shall, by mutual consent, not constitute, and shall not give rise to, a termination without Cause or a resignation for Good Reason as those terms are defined in the EEA. For purposes of clarity, the agreement with respect to the Separation Date is mutually acceptable to you and the Employer and, therefore, does not constitute Good Reason as that term is defined in the EEA.
e. You specifically represent, warrant, and confirm that you have: (a) not filed any claims, complaints, or actions of any kind against the Employer Group with any court of law, or local, state, or federal government or agency; (b) been properly paid for all hours worked for the Employer Group; (c) received all commissions, bonuses, and other compensation due to you other than those specified herein; and (d) not engaged in and is not aware of any unlawful conduct relating to the business of the Employer Group.
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f. You have not asserted or raised against the Employer (or any of the Released Parties) any allegations, claims, complaints (informal or formal, or external or internal) or causes of action, the factual foundation for which involves sexual harassment, hostile work environment, discrimination of any kind, or any other purported violations of Article 15 of the New York State Executive Law (i.e., the New York State Human Rights Law) (collectively, “NYSHRL Claims”). Furthermore, this Agreement is being offered to you to provide economic and other accommodations, and to define the rights and obligations of each party in connection with the end of your employment, and not for the purpose of resolving asserted NYSHRL Claims. Notwithstanding the foregoing, all NYSHRL Claims are released pursuant to the general release in paragraph 5.
g. You hereby acknowledge and agree that, other than as specifically set forth in this Agreement, you are not due any compensation from the Employer, including compensation for unpaid salary, bonus, commission, profit share, severance, accrued or unused vacation or sick time, or in connection with the exercise of stock options or unvested equity grants. Employer shall pay you any remaining submitted reimbursements as submitted prior to the Effective Date in the same manner as an employee. You will not continue to earn vacation or other paid time off after the Separation Date, and you shall not be entitled to payment of accrued but unused vacation at the end of employment for any reason.
h. You agree that the consideration set forth in paragraph 2 constitutes full payment, satisfaction, discharge, compromise and release of and from all matters for which you (on behalf of each of the Releasors) have released the Employer and the Released Parties herein. The Employer’s offer to you is made without prejudice to the Employer and the Released Parties and is not intended to, and shall not be construed as, any admission of liability by the Employer or the Released Parties to you, or of any improper conduct on the part of the Employer or the Released Parties, all of which the Employer and the Released Parties specifically deny.
5. General Release.
a. In exchange for the consideration provided in this Agreement, you and your heirs, executors, representatives, administrators, agents, insurers, and assigns (collectively, the “Releasors”) irrevocably and unconditionally fully and forever waive, release, and discharge the Employer Group, including each member of the Employer Group’s parents, subsidiaries, affiliates, predecessors, successors, and assigns, and all of their respective officers, directors, employees and shareholders, in their corporate and individual capacities (collectively, the “Released Parties”), from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees, damages, debts, obligations, liabilities, and expenses (inclusive of attorneys’ fees) of any kind whatsoever, whether known or unknown, from the beginning of time through the date you sign this Agreement (collectively, “Claims”), including, without limitation, any claims under any federal, state, local, or foreign law, that Releasors may have, have ever had, or may in the future have arising out of, or in any way related to your hire, benefits, employment, termination, or separation from employment with the Employer Group and any actual or alleged act, omission, transaction, practice, conduct, occurrence, or other matter, including, but not limited to:
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(i) any and all claims under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act (with respect to existing but not prospective claims), the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act (with respect to unvested benefits), the Civil Rights Act of 1991, Section 1981 of U.S.C. Title 42, the Worker Adjustment and Retraining Notification Act, the National Labor Relations Act, the Industrial Welfare Act, Occupational Safety and Health Act (OSHA), the New York State Human Rights Law, the New York City Human Rights Law, the New York Labor Law, including any amendments and their respective implementing regulations, and any other federal, state, local, or foreign law (statutory, regulatory, or otherwise) that may be legally waived and released;
(ii) any and all claims for compensation of any type whatsoever, including but not limited to claims for salary, wages, bonuses, commissions, incentive compensation, vacation, and severance that may be legally waived and released;
(iii) any and all claims arising under tort, contract, and quasi-contract law, including but not limited to claims of breach of an express or implied contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm, fraud, defamation, slander, libel, false imprisonment, and negligent or intentional infliction of emotional distress; and
(iv) any and all claims for monetary or equitable relief, including but not limited to attorneys’ fees, back pay, front pay, reinstatement, experts’ fees, medical fees or expenses, costs, and disbursements.
b. In further consideration of the payments and benefits provided to you in this Agreement, the Releasors hereby irrevocably and unconditionally fully and forever waive, release, and discharge the Released Parties from any and all Claims, whether known or unknown, from the beginning of time through the date you sign this Agreement arising under the Age Discrimination in Employment Act (ADEA).
c. This Agreement shall be effective as a bar to each and every Claim you might otherwise have asserted against any of the Released Parties on or before the date of this Agreement. In the event you hereafter discover facts in addition to or different from those which you now know or believe to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected this Agreement, you expressly waive any right to assert after the execution of this Agreement that any such Claim has, through ignorance or oversight, been omitted from the scope of this Agreement.
d. If, notwithstanding the express terms of this Agreement to the contrary, you commence, continue, join in, or in any other manner attempt to assert any claim released herein against any Released Party, then, to the fullest extent permitted by law, you shall reimburse the Employer for all reasonable attorneys’ fees incurred by the applicable Released Parties in defending against such a claim, and the Employer shall have a right to the return of the Severance Payment and 75% of the COBRA Payments, together with interest thereon; provided that the right of return of consideration is without prejudice to the Released Parties’ other rights hereunder.
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e. You are not waiving any rights you may have to: (i) your own vested accrued employee benefits under the Employer Group’s health, welfare, or retirement benefit plans as of the Separation Date; (ii) benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (iii) pursue claims which by law cannot be waived by signing this Agreement; and/or (iv) enforce this Agreement. Furthermore, nothing in this Agreement shall be deemed to prohibit you from participating or cooperating with the Equal Employment Opportunity Commission or other governmental or law enforcement agency in any investigation, administrative proceeding or action involving the Employer conducted or brought by such agency.
6. Employer Limited Release. In exchange for your promises and obligations as set forth in this Agreement, as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Employer irrevocably and unconditionally, fully and forever waives, releases and discharges you from any and all Claims, including, without limitation, any claims under any federal, state, local, or foreign law, that the Employer may have, have ever had, or may in the future have arising out of, or in any way related to your employment with the Employer; provided, however, that this limited release shall not apply to any intentional misconduct, fraud, criminal actions, theft, conversion or other acts of bad faith that occurred on or before the date you sign this Agreement. Nothing contained herein shall prohibit Employer from bringing a claim to enforce the terms of this Agreement.
7. Knowing and Voluntary Consent.
a. You specifically agree and acknowledge that: (i) you have read this Agreement in its entirety and understands all of its terms; (ii) by this Agreement, you have been advised of the right to consult with an attorney before executing this Agreement and have consulted with such counsel as you deemed necessary; (iii) you knowingly, freely, and voluntarily assent to all of this Agreement’s terms and conditions including, without limitation, the waiver, release, and covenants contained in it; (iv) you are signing this Agreement, including the waiver and release, in exchange for good and valuable consideration in addition to anything of value to which you are otherwise entitled; (v) you are not waiving or releasing rights or claims that may arise after you sign this Agreement; and (vi) you understand that the waiver and release in this Agreement is being requested in connection with your termination of employment from the Employer Group.
b. You further acknowledge that you are waiving and releasing claims under the ADEA, as amended, and have twenty-one (21) days to consider the terms of this Agreement and consult with an attorney of your choice, although you may sign it sooner if desired and changes to this Agreement, whether material or immaterial, do not restart the 21-day period.
c. You further acknowledge that you shall have an additional seven (7) days from signing this Agreement to revoke consent your release of claims under the ADEA by delivering notice of revocation to Office of the General Counsel the Employer Group, 1500 Fourth Avenue, Suite 200, Seattle WA 98101 by overnight delivery before the end of the seven-day period. In the event of a revocation by you, the Employer Group has the option of treating this Agreement as null and void in its entirety.
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d. This Agreement shall not become effective until the eighth (8th) day after you execute this Agreement provided that you do not revoke your consent as set forth in paragraph 6(d) of this Agreement (“Effective Date”). No payments due to you under this Agreement or the Options Modification shall be made before the Effective Date. If you revoke the Agreement, no payments or the Options Modification shall be made.
8. Remedies.
a. You agree that it would be impractical and extremely difficult to ascertain the amount of actual damages caused by your material and intentional breach of any of the provisions of paragraphs 3 or 4 of this Agreement. In the event of such a material and intentional breach, the Employer shall not be required to make the Options Modification or to continue to pay the Severance Payment or the COBRA Reimbursement, or if those payments have already been made, then the Employer shall be entitled to reimbursement of the Severance Payment and 75% of the COBRA Payments. You further acknowledge that any failure or threatened failure to comply with the provisions of paragraphs 3 or 4 of this Agreement shall result in irreparable and continuing injury to the Employer for which there will be no adequate remedy at law, and the Employer shall therefore be entitled, in addition to any other relief, including monetary relief, to the issuance of an injunction or temporary restraining order restraining the prohibited conduct, without the obligation to post any bond. In the event of your breach of any of the provisions of this Agreement, all of your obligations under this Agreement, including, but not limited to, the releases and waivers set forth above, shall remain in full force and effect.
b. You acknowledge and agree that any violation of the provisions of paragraphs 3 or 4 of this Agreement shall be considered a material breach of this Agreement (nothing in this paragraph should be construed as meaning that other terms of this Agreement, apart from those here identified, are not material). You agree that the Employer’s actions pursuant to paragraph 7(a), including, but not limited to, filing a legal action, are permissible and are not and will not be considered by you to be retaliatory.
9. Successors and Assigns. Neither Party assign this Agreement without the express written consent of the other Party, such consent not to be unreasonably withheld, delayed or conditioned. This Agreement shall inure to the benefit of the Employer Group and its successors and assigns. You may not assign this Agreement in whole or in part. Any purported assignment by you shall be null and void from the initial date of the purported assignment.
10. Governing Law, Jurisdiction, and Venue. This Agreement shall be governed by and construed in accordance with the laws of New York without regard to any conflicts of laws principles that would require the laws of any other jurisdiction to apply. The Parties hereby agree that the federal and state courts situated in New York County, New York will have jurisdiction over any dispute relating to this Agreement and the Parties hereby irrevocably consent to the in personam jurisdiction of such courts; irrevocably waive any objection to the venue of such courts or the convenience of such forum with respect to any such dispute; and agree that the Parties shall not bring any action or proceeding related to this Agreement in any court other than a court situated in New York County, New York.
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11. Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Parties relating to the subject matter hereof and supersedes all prior and contemporaneous understandings, discussions, agreements, representations, and warranties, both written and oral, regarding such subject matter.
12. Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by you and by an officer of the Employer (excluding e-mail). The waiver by either Party of the breach of any provision of this Agreement by the other Party shall not operate or be construed as a waiver of any subsequent breach by such other party, nor shall the delay by either Party in exercising any right under this Agreement operate as a waiver to preclude any other or further exercise of any such right, power, or privilege.
13. Severability. The invalidity or unenforceability of any provision contained herein shall in no way affect the validity or enforceability of any other provision of this Agreement; provided, however, that upon any finding by a court of competent jurisdiction that the releases in paragraph 5 of this Agreement are illegal, void or unenforceable, you shall execute a release and waiver to the fullest extent permitted by law in order to effectuate the terms and intent of this Agreement.
14. No Admission of Liability. Nothing in this Agreement shall be construed as an admission by the Employer Group of any wrongdoing, liability, or noncompliance with any federal, state, city, or local rule, ordinance, statute, common law, or other legal obligation.
15. Tolling. If you violate any of the post-termination obligations in this Agreement, the obligation at issue will run from the first date on which you cease to be in violation of such obligation.
16. Acknowledgment of Full Understanding. YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE FULLY READ, UNDERSTAND, AND VOLUNTARILY ENTER INTO THIS AGREEMENT. YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF YOUR CHOICE BEFORE SIGNING THIS AGREEMENT. YOU FURTHER ACKNOWLEDGE THAT YOUR SIGNATURE BELOW IS AN AGREEMENT TO RELEASE THE RELEASED PARTIES FROM ANY AND ALL CLAIMS THAT CAN BE RELEASED AS A MATTER OF LAW.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date provided below.
ANDREW KRAFT
| By: | Date: | |||
| Andrew Kraft |
THEMAVEN, INC.
| By: | Date: | |||
| Name: | ||||
| Title: |
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Exhibit 14.1
BUSINESS CODE OF ETHICS AND CONDUCT
Amended and Restated
TheMaven, Inc. a Delaware corporation (“Maven”) is committed to conducting its business in compliance with all applicable laws, rules and regulations and in accordance with the highest ethical standards. In furtherance of this commitment, the Board of Directors of Maven has adopted this Business Code of Ethics and Conduct (the “Code of Ethics”) setting forth the principles that govern the conduct of all employees, officers and directors of Maven and its subsidiaries (collectively, the “Company”).
As used herein, Company Official shall mean any officer of the Company. Some provisions of this Code of Ethics also extend to the family members of employees, officers, directors, or nominees for director. For this purpose, the term “family member” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, son-in-law, brother-in-law, or sister-in-law, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, or officer of the Company. These associations include adoptive relationships.
I. Compliance with Laws, Rules, Regulations, Policies and Procedures
Each employee, officer and director is expected to understand and comply with both the letter and intent of all applicable laws, rules and regulations and with all Company policies and procedures that apply to matters for which he or she is responsible. All employees and officers are expected to participate in compliance training and information sessions when offered by the Company. Any employee or officer who is uncertain as to the meaning or interpretation of any law, rule, regulation, policy or procedure, or its application to his or her responsibilities, is expected to seek advice from a supervisor, manager or other appropriate Company Official.
II. Conflicts of Interest
In carrying out their responsibilities, all employees, officers and directors have a duty always to act in the best interests of the Company and its stockholders. The ability of an employee, officer or director to fulfill this obligation can be compromised if a conflict exists between his or her personal interests and the interests of the Company. In general, a conflict of interest can arise whenever the personal interests of an employee, officer or director in a matter (financial or otherwise) are different from the interests of the Company and its stockholders. Even where the outcome of the matter is on terms that are entirely fair to the Company, the existence of a conflict of interest can create an appearance of impropriety.
While it is not possible to list all of the situations that could present a conflict of interest, examples include:
| ● | Ownership of a material financial interest in any business or other enterprise that does business (whether as a supplier, customer or otherwise), or is seeking to do business, with the Company. |
| ● | Serving as a director, officer or partner of, or in any other managerial role with respect to, or as a consultant to, any business or other enterprise that does business (whether as a supplier, customer or otherwise), or is seeking to do business, with the Company. | |
| ● | Ownership of a material financial interest in, or serving as a director, officer or partner of, or in any other managerial role with respect to, or as a consultant to, any competitor of the Company. | |
| ● | Acting as a broker, finder or other intermediary in any transaction involving the Company. | |
| ● | Any situation where the employee, officer or director will receive any payment of money, services, loan, guarantee or any other personal benefits from within the Company or a third party in anticipation of or as a result of any transaction or business relationship between the Company and a third party. | |
| ● | Ownership of a material financial interest in any business or other enterprise that does business (whether as a supplier, customer or otherwise), or is seeking to do business, with any competitor of the Company. | |
| ● | Serving as a director, officer or partner of, or in any other managerial role with respect to, or as a consultant to, any business or other enterprise that does business (whether as a supplier, customer or otherwise), or is seeking to do business, with any competitor of the Company. | |
| ● | Taking a public position or making public statements contrary to the best interests of the Company or that could result in embarrassment to the Company. |
A conflict also can exist where the person doing business, or seeking to do business with the Company is a family member of an employee, officer or director. However, the acquisition or use by an employee, officer or director of the Company of products or services obtained from the Company in the ordinary course of the Company’s business will not represent a conflict of interest.
All employees and officers are encouraged to avoid relationships that have the potential for creating an actual conflict of interest or a perception of a conflict of interest. Employees and officers must be free of any conflict of interest whenever they act on behalf of the Company, including engaging in negotiations or recommending or approving a transaction, arrangement or relationship with an existing or potential customer, supplier, lender or investor. Any officer who has a conflict of interest with respect to any matter is required to make prompt and full disclosure of the matter to the Compliance Director or, in the case of the Chief Financial Officer, to the Audit Committee. All other employees are required to make prompt and full disclosure of any conflict of interest to the Head of Internal Audit (who shall be the Company’s Chief Financial Officer, serving from time to time, unless some other person is designated by the Company’s Board of Directors). No employee or officer is permitted to participate in any matter in which he or she has a conflict of interest unless authorized by an appropriate Company Official and under circumstances that are designed to protect the interests of the Company and its stockholders and to avoid any appearance of impropriety.
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Any officer who has a question as to whether a given situation or relationship might represent a conflict of interest is required to consult with the Chief Financial Officer. Any other employee who has a question as to whether a situation or relationship might constitute a conflict is required to consult with the Head of Internal Audit.
Directors are required to disclose any conflict of interest to the Chairman of the Board of Directors and to refrain from voting on any matter(s) in which they have a conflict.
III. Corporate Opportunities
All business opportunities that are within the existing or reasonably foreseeable scope of the Company’s business, including planned business ventures, are the property of the Company. Without the prior written consent of the Board of Directors, employees, officers and directors are prohibited from:
| ● | Taking for themselves opportunities that they discovered through the use of Company property or information or through their position with the Company; | |
| ● | Using property or information of the Company or their position with the Company for personal gain; or | |
| ● | Engaging in any business in competition with the Company. |
IV. Confidentiality and Non-Disparagement
Confidentiality
Employees, officers, directors and director nominees are required to maintain the confidentiality of, and not use for personal benefit, confidential information entrusted to them by the Company, its customers or its suppliers, or otherwise acquired in the course of their employment by or service to the Company. Disclosure or use of confidential information is permitted only for a proper business purpose and when specifically authorized by an appropriate Company Official or as required by law or legal proceedings. Confidential information includes all information protected by law or by an agreement between the Company and a third party, any information identified as “proprietary” or “confidential,” or information that might reasonably be regarded as confidential information, as well as other non-public information that, if disclosed, might be harmful to the Company or useful to competitors, including but not limited to:
| ● | Trade secrets, know-how, processes, methods, intellectual property and other proprietary technical information or data. | |
| ● | Undisclosed financial and accounting information. | |
| ● | Strategic information concerning current and future business plans, bid or proposals, projects, ventures, acquisitions, or divestitures. |
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| ● | Operating procedures or programs or methods of promotion and sale. | |
| ● | Pricing information. | |
| ● | Customer or vendor records, contracts, or business terms. | |
| ● | Employee personnel records (e.g., job applications, resumes, performance evaluations and records, compensation information, notices regarding performance, termination notices, etc.). | |
| ● | Information regarding Company disputes, litigation, or compliance matters. | |
| ● | Research information and records. |
Employees, officers and directors must not communicate, divulge or disseminate confidential information at any time during or after termination of service, with respect to directors, or termination of employment, with respect to employees and officers, except:
| ● | To employees or agents of the Company that need the confidential information to perform their duties on behalf of the Company; | |
| ● | In the performance of their respective duties to the Company; or | |
| ● | As otherwise required by law or legal process. |
All employees, officers and directors are required to sign a confidentiality statement. These confidentiality and non-use restrictions continue beyond termination of service for directors, and termination of employment for employees and officers. Upon termination, employees, officers and directors are not permitted to take, copy or retain any records or documents of the Company and may be required to certify that he/she has complied with, and will continue to comply with, these confidentiality and non-use restrictions and requirements.
Non-Disparagement
Employees, officers and directors must refrain from taking actions or making statements, written or verbal that:
| ● | Denigrate, disparage or defame the goodwill or reputation of the Company or any of its trustees, officers, security holders, partners, agents or former or current employees, officers and directors, or | |
| ● | Are intended to, or may be reasonably expected to, adversely affect the morale of the employees of the Company; | |
| ● | Employees, officers and directors also must not make any negative statements to third parties relating to their service or employment with the Company or any aspect of the business of the Company and not make any statements to third parties about the circumstances of the termination of service or employment, or about the Company or its trustees, directors, officers, security holders, partners, agents or former or current employees, officers and directors, except as may be required by a court or governmental body, or as otherwise required by law or legal process. |
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V. Proper Accounting for Company Transactions
The maintenance of accurate financial and accounting records is essential in order to enable the Company to comply with the requirements of the federal securities laws and with its obligations to its shareholders.
Maintenance of Accurate Records
All Company assets and liabilities and all items of revenue and expense shall be properly recorded in the Company’s regular books and records in accordance with generally accepted accounting principles. All employees and officers who are responsible for the recording or reporting of Company property, assets, liabilities, transactions and other activities are required to provide full, fair, accurate, timely and understandable recording or reporting thereof. Without limitation of the foregoing:
| ● | No undisclosed or unrecorded fund or asset of the Company shall be established or maintained for any purpose. | |
| ● | No employee or officer of the Company shall intentionally conceal or fail to record or report any matter that is required to be recorded or reported. | |
| ● | No employee or officer of the Company shall improperly record or report any matter, or improperly alter any record or report of any matter. |
Documentation of Disbursement of Funds
No payment or other disbursement of Company funds shall be made without proper authorization. No approval shall be granted for the payment or other disbursement of Company funds without adequate supporting documentation. No payment on behalf of the Company shall be approved or made with the intention or understanding that any part of such payment is to be used for a purpose other than that described by the documents supporting the payment.
VI. Improper Payments and Gifts to Third Parties
Improper Payments and Gifts
Except for permitted gifts (as described below), neither the Company nor any employee, officer or director shall, either directly or indirectly, authorize or make any payment or gift of money or any other thing of value (including materials, equipment, facilities or services) to any:
| ● | Current or prospective customer, supplier or competitor of the Company or to government officials; or |
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| ● | Any director, officer, employee, general partner, stockholder or owner of a current or prospective customer, supplier or competitor, | |
| ● | if the purpose of the payment or the gift is to induce the current or prospective customer, supplier, competitor or government official improperly to grant or convey any benefit to, or forgo any claim against, the Company or any of its employees, officers or directors, or otherwise to influence a business or other decision of the current or prospective customer, supplier, competitor or government official. |
Permitted Gifts
An employee, officer or director may make gifts, generally in the form of meals, entertainment or specialty advertising items, to Company customers, suppliers or other third parties engaged, or that may become engaged, in business with the Company if the gift meets all of the following criteria:
| ● | It is consistent with customary business practices; | |
| ● | It is not for an improper purpose; | |
| ● | It is not in contravention of any applicable laws, rules, regulations or ethical standards; and | |
| ● | Public disclosure of the full details of the gift would not cause embarrassment to the Company. |
Foreign Corrupt Practices Act Anti-Corruption Policy
All employees, officers and directors are required to adhere to the Company’s Foreign Corrupt Practices Act and Antibribery Policy and Foreign Corrupt Practices Act Compliance Program Manual, both of which establish prohibitions on certain payments to foreign government officials to assist in obtaining or retaining business.
Acceptance of Gifts or Other Personal Benefits
No employee, officer or director shall solicit from any supplier, customer or other person doing business, or seeking to do business, with the Company any gift of money, products or services, gratuity, loans or guarantees, or other personal benefits of any kind.
An employee, officer or director, including their family members, may accept an unsolicited gift or gratuity of nominal value or reasonable business entertainment (including recreation and attendance of sporting or cultural events) if the gift or gratuity meets all of the following criteria:
| ● | It does not go beyond common courtesies usually associated with accepted business practices; | |
| ● | It does not interfere with the recipient’s independence or judgment in carrying out his or her responsibilities on behalf of the Company; and |
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| ● | Public disclosure of the full details of the gift or gratuity would not cause embarrassment to the Company. |
Any gifts or gratuity that do not meet these requirements must to the extent possible be returned.
VII. Relationships with Customers
When dealing with customers, the Company is committed to:
| ● | Providing all customers with exceptional service; | |
| ● | Dealing fairly and ethically with all customers and treating customers with respect; | |
| ● | Providing customers with accurate and clear information regarding the services offered by the Company; and | |
| ● | Investigating promptly and resolving on fair terms all customer complaints and inquiries. |
Each employee, officer and director has a responsibility to use his or her best efforts to ensure that these objectives are attained. The Company prohibits manipulation, misrepresentation of facts, and other forms of unfair dealing with customers.
VIII. Relationships with Suppliers and Consultants
When dealing with suppliers and consultants of products and services to the Company, all employees, officers and directors are required at all times to act in the best interests of the Company, while at the same time adhering to the highest standards of ethical conduct. All unlawful behavior, manipulation, misrepresentation of facts, or any other forms of unfair dealing are prohibited.
IX. Fair Competition
The Company is committed to fair and honest competition. The Company seeks to achieve its competitive advantage through competitive prices, products and services, and not through illegal or unethical business practices. All employees, officers and directors are required to adhere to all laws and regulations regarding fair competition, including antitrust laws. Misappropriation of trade secrets or other proprietary information, manipulation, misrepresentation of facts and all other forms of unfair dealing are prohibited.
X. Relationships with Employees
All employees and officers are entitled to work in an environment free of discrimination and harassment. Therefore the Company strives to provide each employee and officer with a workplace that is free from unlawful discrimination or harassment. It is the policy of the Company to provide equal employment opportunity to qualified individuals regardless of race, religion, gender, sexual orientation, national origin, age, or their status as disabled veterans or as disabled individuals. Equal opportunity applies to all aspects of the employment relationship, including initial employment, promotion, training, wage and salary administration, seniority, retirement, and employee benefits.
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XI. Protection and Proper Use of Company Assets
Proper protection and proper use of Company assets is the responsibility of each employee, officer and director. Employees, officers and directors are required to promote the efficient use of Company assets and to take appropriate security measures to safeguard physical property and other assets against unauthorized use or removal, as well as against loss by wrongful acts or negligence. Employees, officers and directors may use Company property only for legitimate business purposes and strictly in accordance with established Company policies and guidelines.
XII. Insider Trading
All employees, officers and directors are required to adhere to the Company’s Insider Trading Policy, which governs trading by employees, officers and directors in Maven stock.
XIII. Political Activities
Employees, officers and directors are free to participate in lawful political activities on their own time and at their own expense, and to make personal contributions to political parties, committees or candidates of their choice. However, under no circumstances shall an employee, officer or director use Company facilities or assets, or be compensated or reimbursed by the Company, for their personal political activities or contributions.
While employees and officers are encouraged to participate in civic and community activities during their non-work hours, an employee’s or officer’s determination to seek election or appointment to public office, including membership on a public board or commission (“public office”), raises special concerns. Because the Company’s business frequently interfaces with many government branches, employees, officers and directors would have a responsibility to disqualify themselves from any action in which they know the Company has an interest. In addition, care must be taken that campaigning for office or fulfilling public responsibilities is not done during work hours. Accordingly, any employee or officer who wishes to seek or accept public office must provide the Head of Internal Audit with reasonable advance notice of that intent. In certain cases, depending on the nature of the office and other surrounding circumstances, the Company may decide that the employee or officer should not seek or accept such office while remaining in the Company’s employment without a determination by the Company’s Chief Financial Officer (or in the case of the Chief Financial Officer, the Board of Directors) that such activities will be consistent with Company policies and applicable laws and standards.
In addition, lobbying activities by employees, officers and directors may require disclosure to government agencies. Lobbying activities include, but are not limited to, contacting legislators, regulators, government officials, and their respective staff members on matters relating to the business of the Company or its affiliates, as well as any other efforts generally intended to influence legislation or administrative action. Accordingly, employees, officers and directors must consult with the Company’s General Counsel, if any, or the Company’s Chief Financial Officer, before undertaking any lobbying activities on behalf of or related to the business of the Company or its affiliates.
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XIV. Certain Communications with Third-Parties
It is the Company’s policy to comply with all applicable law and to cooperate with any reasonable and lawful request made in a government investigation. All employees, officers and directors must immediately notify the Company’s General Counsel, if any, or the Company’s Chief Financial Officer, if they receive an inquiry, subpoena, or other legal document regarding the Company or any of its affiliates or its respective business from any governmental agency. Employees, officers and directors must also immediately notify the Company’s General Counsel, if any, or the Company’s Chief Financial Officer, if any communications are received from lawyers concerning a dispute with the Company or any of the Company’s affiliates or any of its respective employees, officers, directors, suppliers, contractors, vendors, partners, customers, or competitors. In addition, employees, officers and directors should consult with the Company’s General Counsel, if any, or the Company’s Chief Financial Officer, before producing any documents, submitting to an interview, answering questions, or responding to any request regarding litigation or a government investigation concerning the Company or any of its affiliates or its respective business.
Following termination of service or employment with the Company, employees, officers and directors shall continue to cooperate with the Company during the course of all third-party proceedings, which includes internal investigations, administrative investigations, governmental investigations, or proceedings and lawsuits, arising out of the Company’s business about which the former employee, officer, or director has knowledge or information.
Former employees, officers and directors must not communicate with, or give statements to, any member of the media (including print, television, electronic, radio, or digital media) relating to any matter (including pending or threatened lawsuits or administrative investigations) about which they have knowledge or information as a result of service or employment with the Company.
XV. Compliance Procedures
Distribution of this Code of Ethics
A copy of this Code of Ethics shall be furnished to each employee, officer, director and director nominee of the Company and shall be posted on the Company’s website (www.maven.io). Company officers are required to ensure that all Company personnel in the departments for which they are responsible receive a copy.
Any employee who has a question concerning the interpretation or application of any provision of this Code of Ethics should consult his or her immediate manager, who may, if necessary, refer the question to the Head of Internal Audit or an appropriate Company Official. Alternatively, any employee, officer or director may contact the Head of Internal Audit directly.
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Reporting Violations
Any employee or officer who has knowledge of a violation by the Company or any employee, officer or director of any law, rule or regulation or this Code of Ethics, or suspects that such a violation has occurred, is required to report the matter to an independent third party via a dedicated toll-free hotline or a secure website, or in written form directly to the Head of Internal Audit in accordance with the process set forth on the Company’s website (www.maven.io). All valid concerns will be investigated under the direction of the Chairman of the Audit Committee.
The Company will make every effort, within the limits allowed by law, to keep confidential the identity of anyone requesting guidance or reporting a violation or suspected violation. However, it may not be possible to maintain the confidentiality of the reported person or the reported information if (i) disclosure is necessary to enable the Company or law enforcement officials to investigate the matter, (ii) disclosure is required by law or (iii) the person accused of a violation is entitled to the information as a matter of legal right. All employees, officers and directors are expected to cooperate, to the extent requested, in any investigation of any violation of any law, rule or regulation or this Code of Ethics.
No adverse action will be taken against any person who in good faith reports a violation, or a suspected violation, by the Company, or any employee, officer or director of any law, rule or regulation or this Code of Ethics. Any such retaliation is also a violation of this Code of Ethics and will be grounds for disciplinary action against the person or persons who engage in retaliation. Any employee, officer or director who believes that he or she has been retaliated against may file a complaint with the Head of Internal Audit, who shall be responsible for the investigation of the matter.
Violations
Any employee, officer or director who fails to comply with any applicable law, rule, or regulation or with this Code of Ethics is subject to disciplinary action, which could include, without limitation, a reprimand, probation, suspension, reduction in salary, demotion or dismissal — depending upon the seriousness of the offense.
XVI. Amendments and Waivers
The Board of Directors must approve any amendment to this Code of Ethics. No waivers or exceptions to this Code of Ethics are anticipated; however, any waiver of any provision to this Code of Ethics for employees, other than executive officers, requires the approval of the Chief Financial Officer. Any waiver involving an executive officer or director requires the approval of the Board of Directors or a designated Board Committee and must be promptly disclosed to shareholders within four business days of such determination by website disclosure or as otherwise required by the applicable rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange.
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XVII. Persons Subject to this Policy
This Policy applies to all officers of this Company and its subsidiaries, all members of the Board, and all employees of this Company and its subsidiaries. This Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic information of this Company or any other company. This Policy also applies to family members, other members of a person’s household, and entities controlled by a person covered by this Policy, as described below.
ACKNOWLEDGMENT AND CERTIFICATION
I certify that:
| 1. | I have read and understand the Company’s Business Code of Ethics and Conduct (the “Code of Ethics”). I understand that the Board of Directors of the Company is available to answer any questions I have regarding the Code of Ethics. | |
| 2. | Since the date the Code of Ethics became effective, or such shorter period of time that I have been an employee, officer or director of the Company, I have complied with the Code of Ethics. | |
| 3. | I will continue to comply with the Code of Ethics for as long as I am subject to the Code of Ethics. |
| Signature: | ||
| Print name: | ||
| Date: |
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Exhibit 14.2
CODE OF ETHICS FOR FINANCIAL OFFICERS
This Code of Ethics for Financial Officers has been adopted by the Board of Directors of TheMaven, Inc. a Delaware corporation (the “Company”) to promote honest and ethical conduct, accurate and timely disclosure of financial information in the Company’s filings with the Securities and Exchange Commission (the “SEC”), and compliance with all applicable laws, rules and regulations.
The Company expects all of its employees to carry out their job responsibilities in accordance with the highest standards of personal and professional integrity, to comply with all applicable laws, and to abide by the provisions of the Company’s Business Code of Ethics and Conduct and all other corporate policies and procedures that may be adopted by the Company from time to time governing the conduct of its employees. This Code of Ethics for Financial Officers supplements the Company’s Business Code of Ethics and Conduct as it relates to the activities of the Company’s Chief Executive Officer, Presidents, Chief Financial Officer, Treasurer, Chief Accounting Officer, Director of Accounting and Corporate Controller, hereafter referred to as the “Financial Officers”.
Each Financial Officer when performing his or her duties must:
| ● | Maintain high standards of honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. | |
| ● | Avoid conflicts of interest and disclose to the Chairman of the Audit Committee any material transaction or relationship that reasonably could be expected to give rise to such a conflict. | |
| ● | Take reasonable actions within the scope of his or her responsibilities to ensure that the disclosures in reports and documents filed by the Company with the SEC and in other public communications made by the Company are accurate, complete, fairly stated, timely and understandable. | |
| ● | Ensure that the Company maintains a strong control environment, including the adequacy of design of control and ongoing monitoring of operational effectiveness of key controls, especially those that relate to the accuracy and completeness over the financial reporting process of the Company, and those that may prevent or reveal fraud. | |
| ● | Comply with applicable laws, rules and regulations, including the rules, regulations and policies of public regulatory agencies. | |
| ● | Act at all times in good faith, responsibly, with due care, and diligence in carrying out his or her responsibilities. | |
| ● | Maintain the confidentiality of confidential financial or other information acquired in the course of employment, except when disclosure is properly authorized or is required by applicable law or legal process, and not use any such confidential information for personal advantage. |
| ● | Not take any action to coerce, manipulate, mislead or fraudulently influence an independent accountant or internal auditor engaged in the performance of an audit or review of the Company’s financial statements or accounting books and records. | |
| ● | Promptly report any actual or suspected financial fraud, questionable accounting matters, or possible violations of the law or violations of this Code of Ethics for Financial Officers, either directly to the Director of Internal Audit, if any, or the Chairman of the Audit Committee. |
Any Financial Officer who violates this Code of Ethics for Financial Officers will be subject to appropriate disciplinary action, including possible termination of employment. Violations of this Code of Ethics for Financial Officers may also constitute violations of law and may result in civil and criminal penalties for you, your supervisors and/or the Company.
The Audit Committee shall be responsible for overseeing compliance with this Code of Ethics for Financial Officers and shall direct the investigation of any alleged violation and report its findings, including any recommended action, to the Board of Directors.
Code Attestation
I attest that I have received and read the Code of Ethics for Financial Professionals, dated ______________________, and understand my obligations as an employee to comply with the Code of Ethics for Financial Professionals as well as all applicable policies, standards, procedures, programs and guidelines. I understand my compliance role, responsibilities and accountability with respect to the financial processes both directly assigned to me and overall for the Company’s benefit. I understand that my agreement to comply with the Code of Ethics for Financial Professionals does not constitute a contract of employment.
| Name: | |
| Title: |
Exhibit 21.1
Subsidiaries
| Maven Media Brands, LLC | Delaware |
| TheStreet, Inc. | Delaware |
| Maven Coalition, Inc. | Delaware |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Ross Levinsohn, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2020 of theMaven, Inc.; | |
| 2. | Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and | |
| d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during any period covered by this Report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: August 16, 2021
| /s/ Ross Levinsohn | |
| Ross Levinsohn | |
| Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Douglas Smith, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2020 of theMaven, Inc.; | |
| 2. | Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and | |
| d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during any period covered by this Report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: August 16, 2021
| /s/ Douglas Smith | |
| Douglas Smith | |
| Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of theMaven, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Annual Report on Form 10-K of the Company for the twelve months ended December 31, 2020 the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: | August 16, 2021 | By: | /s/ Ross Levinsohn |
| Ross Levinsohn | |||
| Chief Executive Officer |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to theMaven, Inc. and will be retained by theMaven, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of theMaven, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Annual Report on Form 10-K of the Company for the twelve months ended December 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 16, 2021 | By: | /s/ Douglas Smith |
| Douglas Smith | ||
| Chief Financial Officer |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to theMaven, Inc. and will be retained by theMaven, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.